Here’s a profitable trend following strategy based on the 21 period Average True Range and the Supertrend indicator.
It’s designed to trade off the daily time frame. Please feel free to experiment with other time frame’s as well.
You’ll need to adjust ATR values for the lower time frame’s.
Chart Setup
Indicators: SuperTrend.ex4, Average True Range (ATR 21)
Preferred time frame(s): Daily chart
Trading sessions: End of day
Preferred Currency pairs: Any
Download
Download the Daily Forex Strategy With Average True Range for Metatrader 4.
AUD/CAD Daily Chart
The chart shown above illustrates the easy trading setup.
Low ATR values + green supertrend = Open a buy trade. Low ATR values + red supertrend = Open sell trade.
Low ATR values mean low volatility thus reduces your trading risk.
Trading Rules
Buy Rules:
- Average True Range has to be below 0.0100 (low volatility)
- Supertrend flips from red to green color (bullish trend)
Go long. Set stop-loss at 0.75% of the current ATR value. For example at 75 pips if ATR value shows 0.0100.
Price objective methods: (1) Use risk-to reward 1:2 (i.e. risking 75 to make 150). (2) Trail you stop up below the rising Supertrend line.
Sell Rules:
- Average True Range has to be below 0.0100 (low volatility)
- Supertrend flips from green to red color (bearish trend)
Go short (sell) now. Set stop-loss at 0.75% of the current ATR value. For example at 75 pips if ATR value shows 0.0100.
Price objective methods: (1) Use risk-to reward 1:2 (i.e. risking 50 to make 100). (2) Ride the trend! Trail you stop down above the falling Supertrend line.
Free Download
Download the Daily Forex Strategy With Average True Range for Metatrader 4.