The ATR Indicator Is The Single Best Indicator Forex Traders Can Have (Use It or Lose It)
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The ATR Indicator Is The Single Best Indicator Forex Traders Can Have (Use It or Lose It)
there are over 10,000 indicators you can add to your chart at any given time and
out of all of those indicators the single best one on the planet doesn't
even try to tell you if prices going long or short doesn't even care
gangster and I gave it away in the thumbnail it's the ATR it's the average
true range which if I were to have ten thousand traders guess which one it was
going to be none of them would have picked the ATR and if you've ever used
it you are very surprised by this answer in terms of what the best Forex
indicator on the planet actually is so let's get right into it guys in this
video I'm gonna explain how the ATR works and just what it is and what it
does and then why you should be using it 100% of the time there should not be a
single trade that
you make without consulting the ATR first that is why it
is the number one trading indicator on the planet because every single trader
on earth should be using it no other indicator can say that about now I
wanted to make this video kind of later but I push this to the front a little
bit because as you guys know a lot of you know I host something called the
Forex q and a podcast and what it is if you're unfamiliar is listeners will
ask me a question they'll go to no-nonsense forex.com slash ask VP and I
answer them as quickly as I can via email now some of those questions
and making the show and that's that's how the show is created from li
steners
like you asking me questions now the very first episode I made episode 1 went
over the top four questions I already get just on the street you know anywhere
out in public in a bar you know acquaintances that I get when people
discover what I do just for the purpose of you not having to ask me a question
like that and then you could ask me something different if you wanted to so
that was constructive I think but what turned out happening is once I open this
up for questions the number one question I got that I probably get over
50% of the time
as of right now is what are the indicators that you use in your
algorithm so people know that I use an algorithm which is not as daunting as it
sounds it's actually very simple of let's say four to six indicators that I
follow and if they all tell me to go long I go long if they all tell me to go
short I go short and that's how I do what I do and they want to know what
they are you know screw all this learning how to trade nonsense just tell
me what you use and I'll just use that and make a bunch of money the answer is
no every time stop asking there's no way I'm giving my
algorithm away to anybody it took three blown accounts thousands
of hours coming home and testing all these goofy indicators with on all
different settings on all different time frames and all different currency pairs
to get to the combination I have right now and if you think I'm
just going to
give it away to you because you asked you're insane you're bold and I do
commend you for this hey I'm not mad at you for asking this question fortune
favors the bold nothing favours the timid so good on you
for being bold but if you think you're getting any piece of this you're wrong
until today I didn't even realize that the ATR was a piece of this algorithm
and I'll explain why in a minute but it is something I use on every single trade
I just for some reason didn't count it as part of what's on my chart but you'll
understand why in a moment first off let's just really quickly go over what
an algorithm is because I want all of you over time to have one for yourself
like I said it's not math II it's it's not it has nothing to with algebra I
suck at
both I really really suck at algebra it's just a series of things by
definition that must be true or untrue before something actually happens so in
a trading sense for me it's a series of indicators that actually must all agree
with each other every single one must say hey VP on this currency pair it is
time to go long or it is time to go short if even one of them is indecisive
or tells me to go the other way then I do nothing I move on I don't have to
trade all the time now as far as how I set up my algorithm, or
the indicators within it really it's all of them attempt to avoid trading where
the big banks trade you know if you've seen my videos before you understand
this how important it is to stay unpopular and to avoid those hotspots
where everybody else is putting in orders because that's where the big
banks like to take things the opposite way of where you intended thi
s is how
losses happen for most people and but all things considered even though I'm
staying unpopular I still want them to get me in and out of a trade at the best
possible times but before any of that happens I actually have to know how much
to risk first that's why I have to consult the ATR and the reason this
whole time I forgot it was part of my algorithm is because I already have X
amount of indicators on my chart as is I don't really want to add one more so I
just pretty much put it on my chart just to see where the numbers and then I
immediately take it off but it is absolutely part of my trading system and
technically part of my algorithm and is
the only piece of it I am willing to
divulge but it is the most important piece because it is the most important
indicator out there because understand everybody wants that one indicator that
one standalone indicator that is just amazing at predicting where price will
go and that indicator doesn't exist you need a combination of indicators that
confirm each other so you can really drill down in those absolute best times
to go long or go short but the ATR what makes it the best it's the one because
it is the one indicator everyone should be using I've said it before guys that
is what makes it the best because this here does not exist this here absolutely
does and everybody needs to use it this is not to answer people want to hear
because there is nothing sexy
about this indicator everybody chases the sexy
stuff this is dead unsexy nobody wants to hear about it
they want the indicator that gets them into that big trend earlier calls that
perfect reversal you know they have no time for something that does not do
either one of those things we will get off of this picture
but the ATR is crucial for money management and money management is
crucial to winning if you guys have not seen the money management video I made
it's just a very short video kind of kicking off the money management
playlist that this video is also going to be on go watch it it is the one thing
most responsible for your trading account going up or going down and the
ATR is the most important indicator when it comes to money management yet another
reason why this thing is so important and why it is at the very very top of my
list so let's
go ahead and talk about it and tell you what it is it's about time
to do that huh the Average True Range all it does is tell you how many pips a
particular currency pair has moved on average in the past X amount of candles
so the default settings for the ATR on most platforms is 14 so in the past 14
candles on average from top to bottom how many pips does this thing move
that's it the end all right and so I'm gonna go to my charts in a second here
I'm gonna show you how to set it up and a little more about it before I do that
though here's the way I describe trade entries in terms of how much money to
put on a trade okay I don't I don't speak in units I don't say put 10,000
units on the euro dollar to go long I don't say that I don't say in dollar
amounts e
ither I don't say put 4,500 on the pound kiwi to do this I I don't I
say how much are you trading per pip what is your pip value to me that's the
best way to speak in money management terms and that's from this point forward
that's how you're gonna hear me talk so I don't speak in lots either because a
lot on one lot on the euro dollar is right now is 10 dollars a pip but if
you're gonna trade the Euro Pound for example which is one of the charts we're
going to look at one lot does not equal $10 a pip so what I really care about in
terms of how to determine how much risk to put on any given trade I will say how
much money per pip are you trading what is your pip valu
e
all right so now that that is clear let's go ahead
and go to the charts and I'll show you the ATR all right so here we are at the
Euro Pound and I use this one as a good example because it mu typically moves
very slow compared to most currency pairs so I also have waited to the
very end of the day this is the end of the trading week so nothing is moving
now for you you are gonna want an average of let's just say fourteen
candles you want fourteen completed candles so if you are a daily chart
trader like I am and in Episode three of the podcast I explain why you either
want to wait until the end of the trading week if it's a Friday but if
it's any other day of th
e week you want to measure the ATR about I don't know 20
30 minutes before the candles about to close now why do I say that because if
you don't if you wait till an hour after the candle before is closed this candle
is going to be very small and it's gonna throw off the equation all right I hope
that makes sense maybe it'll make more sense if we actually pull it up
so average true range now the ATR comes standard on just about every mt4
platform out there so I don't need to provide a download link really and what
I do I leave it alone some of the best indicators out there you don't even need
to mess with I do 14 periods I just keep the same colors and lines and just hit
OK and there it is and so what is the ATR of the Euro Pound can anybody tell
me it's right here 41 pi
ps this line just tells you over time what it has
been you can really just ignore the line what I want to know is this number right
here and that is it 41 pips from top to bottom in the last
14 candles this has been the average now if I were to do this you know let's say
during the asian session where things have just kind of gotten going and
things haven't been moving too much this no
is going to be lower because this candle is gonna be a lot smaller because it
hasn't had the chance to really do what its gonna do for the day so you're not
gonna get the most accurate number here that's why I recommend checking this
thing right before the end of the day or if it's the weekend
you can just do what
I do and check it on the weekend so 41 is your number there so let's go ahead
and get rid of this and let's move on to something that moves a lot faster the
pound kiwi now same thing hit OK and you can see on this one
it moves a lot more than the Euro Pound does doesn't it
125 pips per day if we're counting the last 14 periods and this is a slow time
of year guys this thing can easily trade into the 200s sometimes the 300s
depending on what's going on and out of the 8 major currency pairs this is
typically the fastest one and the Euro Pound is typically the slowest one and
so this is a good illustration I think and in terms of comparing the two and
how the ATR can help you determine what your pip value needs to be for each one
so let's go back
to the slide and I'll show you how this works so let's compare
the two the ATR of the Euro Pound we determined
was 41 on the pound kiwi it was 125 now I am terrible at math but I can tell
you right now that one is about three times more than the other one is so what
do we do we understand first that currently the Euro Pound is moving about a
third of the speed of the pound Kiwi and conversely the pound Kiwi is moving
about three times the amount of the Euro pound
alright we've established that right so how do we trade it well pretty
simple just for example if you're trading the euro pound at $6 a pip you
can with confidence and with ease trade the pound Kiwi all you have to do is
trade 1/3 less if you're putting $6 a pip here you put $2 a pip here and your
results
are going to be very similar it seems pretty obvious to me but the vast
vast majority of traders I can guarantee you are putting the same amount per
pip over here than they are over here a lot of you who are watching this video
for the first time that's what you probably do that is your answer to money
management my question to you is what are you doing why are you doing it that
way are you sitting there telling me that you are three times as confident in
this trade that you are this trade because whether or not you're actually
saying it that's what your actions are saying this is a very foolish and
irresponsible way to trade because if this trade goes south on you that
's
gonna be a really big dent in your account and you should never let one
loss affect your account that adversely guys don't be one of these people do it
right and you do it right by using the ATR to determine numbers like this and
then you can decide how much m
oney actually goes where I know I keep
referring back to the podcast because it's actually very relevant for this
video but episode 4 I talked about the reason why you should be trading a lot
more currency pairs than you probably do and I think one of the big reasons why
people don't is because pairs like this seem very ominous very scary because
they move so much there's really no reason to feel that way because if you
just put the right amount of pip value onto it then it's just like trading
anything else and this opens up your trading repertoire so much more because
now you're giving yourself that much more opportunity to succeed to make
money to where you are severely limiting yourself if you only trade a small
handful of currencies this is how you open things up this is how you multiply
your success but only if you do it the right way if you
do it the wrong way it
can be the worst thing to ever happen to you but by using the ATR and using it
the right way you can trade any pair out there you want with ease
so in conclusion first off understand that money management is the one thing
that's gonna separate you from the losing traders when it's all said and
done because it is the one thing more than anything that determines whether
your bank account goes up or down and what's the most important tool you need
when it comes to money management it the ATR and you should have it either on
your chart or ready to go ready ready to tell you what the ATR is for a certain
pair always 100% of the time neve
r ever trade without it it is that
important guys now who else out there is drilling down into Forex money
management like I am nobody it's only the most important thing ever and people
are doing you a gigantic disservice by not talking about it more and so if you
really do want to succeed you know what to do you got to subscribe to this
channel we are just getting started in terms of everything yes we're also going
to go over entries and how to get the best entries to the really good sexy
stuff that's all gonna be there but money management is something we really
need to get you ironclad no doubt in anyone's mind amazing at because if we
do this the rest is easy so hit subscribe hit the bell don't miss
anything check out the podcast check out no-nonsense forex.com it has everything
the videos the podcasts the blog all of it but follow a youtube channel that is
dedicated to your success put it all together and let's go get it.
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