Profitable Average True Range Forex System
Many forex traders don’t have a clue when it comes to set a take profit target for their currency trades. Here’s how the average true indicator can help to calculate a TP level that can be reached easily.
I’ve developed a profitable forex system that consists of 2 indicators, used to generate trade entry signals and one ATR indicator to calculate stop-loss and take profit levels. There’s no second guessing needed with this system.
Used MT4 indicators: indicatorarrows.ex4, average true range, RSIFilter.mq4 (all default settings)
Preferred time frame(s): 1 min charts and up
Recommended trading sessions: scalping and day trading (London and New York), any session for swing trading (H1, H4) and long-term trading (D1, W1)
Currency pairs: majors and currency crosses
Example: GBP/USD Daily Chart (click the image for full size)
The daily chart above is an example of the ATR forex system in action on the British Pound/US Dollar pair. As you can see from the image, the system issued 9 valid signals (see rules below) and all were winners. Profit target is 60% of the 14 day period ATR value. Place your stop-loss at 70% of the 14 day period ATR value or slightly above/below resistance/support level.
ATR System Trading Rules
- RSI Filter orange color (trend up)
- Indicatorarrows draws green arrow
==> Open buy trade. Place your stop-loss slightly below the most recent support price level or at 70% of the 14 day period ATR, for example, if ATR shows 100 pips, place your stop-loss 70 pips below your entry price.
Take profit method: Use 60% of the 14 day average true range, for example it the ATR over the last 14 days is 100 pips, set your profit target at 60 pips.
- RSI Filter blue color (trend down)
- Indicatorarrows draws red arrow
==> Open sell trade. Place your stop-loss slightly above the most recent resistance price level or at 70% of the 14 day period ATR, for example, if ATR shows 80 pips, place your stop-loss 56 pips above your entry price.
Take profit method: Use 60% of the 14 day average true range, for example it the ATR over the last 14 days is 200 pips, set your profit target at 120 pips.