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Hello Traders,
For 2015 I would like to wish all of you discipline and patience in your trading!
Hello Traders,
I was asked today on how to adjust stops and targets when volatility increases, while I don’t have an exact black and white answer, couple of ways I found to be helpful are :
- Using ATR as a measure
- Using support and resistance levels.
ATR stands for Average true Range. I use it at times to measure average range for days on specific periods, sometimes I use it when looking at intraday charts. Knowing the ATR can help you in stretching or shrinking your stops and targets.
Here is an example: If you are looking at an hourly chart and using an ATR with 14 periods and it shows value of 8 points for the mini SP, what it tells you is that in one hour you can expect on average moves of around 8 points from high to lows. Knowing that figure can help you in placement of stops as well as targets. Comparing this to periods of low volatility where ATR shows value of 4 which in that case should encourage you to take smaller profits and use smaller stops as statistically there are less chances for bigger moves.
