ATR Stop
Loss
Putting this into practice, an ATR
stop loss can be used in technical trading as to not
prematurely exit a position. To calculate this, the maximum in
the range of the ATR measure (assuming a long position) needs
to be derived. This stops the trailing stop if price moves
against its direction. Example: a stop loss at
4 ATR(10) means the
highest high value in the range of the average true range of
the last 10 bars multiplied by
4.
To calculate the stop loss position
use the following
MAX[Close (4 x ATR
(10))] = Stop
Position
