ATR Channels indicator

ATR Channels indicator

ATR Channels indicator is a technical tool that belongs to the category of trend channel indicators. The indicator can be used to determine the trend, as well as support and resistance levels.

The ATR Channels indicator belongs to the category of trend channel indicators. The price chart of a currency pair displays several price channels built using moving averages and the ATR value.

The settings of the ATR Channels forex indicator allow you to assign a certain coefficient to each price channel, which makes it possible to narrow or expand each channel separately.

What is the ATR channels indicator?
Naturally, the oscillatory movements caused by market volatility have become an excellent opportunity for building various channel strategies.

However, the classic channel design has a huge weakness; channels are static. The ATR Channels Indicator is a technical analysis tool that plots multiple channels around price. The channel is built taking into account market volatility and has a dynamic value.

The ATR channels indicator is a multi-currency instrument, so the choice of timeframe depends solely on the trader’s preferences. ATR channels can be used on any timeframe, so the indicator can easily be made an integral part of both scalping and long-term strategies.

Key features and benefits of the ATR Channels indicator
The indicator builds a kind of channel from many lines, the boundaries of which act as strong support and resistance levels.

In practice, these lines are used in a similar way to level trading. Namely, you need to trade both on the breakdown of levels and on their rollback.

The channel direction angle indicates the direction of the trend. If the channel is directed upwards, positions are opened only for buying, if downwards – only for selling. If the channel is directed horizontally, the market is flat, so it is worth trading on a rebound from the opposite boundaries of the channel.

It is also worth noting that you can easily place both stop orders and take profit by channel level.

ATR Channels trading strategy

Let’s discuss the trading strategy based on ATR Channel.

Sell strategy:
The direction ATR Channel must be pointing downwards.
The price should close below the upper boundary of the channel after testing it.
Place the stop-loss few pips above the top line of the channel.
Your first profit target should be the midline of the channel. You may close the sell position completely once the price reaches the lower boundary of second last channel.
Buy strategy:

The direction ATR Channel must be pointing upwards.
The price should close above the upper boundary of the channel after testing it.
Place the stop-loss few pips below the bottom line of the channel.
Your first profit target should be the midline of the channel. You may close the buy position completely once the price reaches the upper boundary of second last channel.
ATR Channels conclusion
The ATR Channels indicator is a great tool for technical analysis. It can be used to identify market trends and phases. The tool is equally good for both scalpers and long-term traders. However, like any other tool, the ATR Channel indicator may not always be a winning strategy. Hence, you are advised to use any other confirmation tool to increase the chances of success in your trading.