ATR Levels

ATR Levels

ATR is a metric used to calculate our realized movement over a given period of time, we calculate the difference between high, low and close, and find a value that tells us how much movement we can expect, given a set loopback, even factoring gaps in price. I’ve found this to be an extremely useful tool to help me manage winners, and spot good risk/reward opportunities, both long vol, and short vol.

Understanding ATR

In this example strategy, we will apply the 4 hour ATR to our hourly charts of the SPX and ES. We want to look at how much movement we expect in a given 4 hour period, and then offset this distance from the open of our new 4 hour periods, for SPX at market open, then 1 PM. We can also use this on /ES, or whatever else you desire. This gives us a short term view at market volatility. We can adjust this however you desire to fit your specific trade idea, but for sake of example, let’s start here.

The Strategy: Trend Is Your Friend, Until Its Not

Disclaimer: AlphaLab is not a registered investment advisor. The following information, including the trading system described, is provided for educational and demonstration purposes only. It should not be considered investment advice. The mentioned trading systems are tools to demonstrate the infrastructure and methodology behind systematic trading approaches. Actual trading involves risks, and individuals should conduct their own research and consult with qualified financial professionals before making any investment decisions.

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