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