In the World of Forex trading, there are many indicators of varied uses. Some are used to show trends, others to measure market volatility, and others for other significant roles in figuring out the market.
Iq Option is one of the best Forex brokers in the world. And as such offers all indicators (101) on their charts.
One of the most commonly used indicators on Iq Option is the Average True Range (ATR) Indicator.
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But what really is ATR Indicator, and how can you use it to trade on Iq Option?”
Well, in this guide I’ll teach you everything you need to know about the Average True Range Indicator!!
Read every detail keenly to become a pro using the indicator.
What to expect in this guide.
- What is the Average True Range (ATR) Indicator?
- The Principle behind Average True Range Indicator.
- How to Set Up Average True Range Indicator on Iq Option.
- Using the Average True Range Indicator to trade Forex on Iq Option.
What is the Average True Range (ATR) Indicator?
Average True Range Indicator is a technical analysis tool that is used to measure market volatility!
This is to say, the ATR Indicator is not a trend marker but a volatility determiner!
It is an indicator best used as a complement to more price direction oriented indicators!
It appears as a simple continuous line at the bottom of the Iq Option chart while in use.
This Indicator was introduced in Forex Trading by Welles Wilder.
It is one of the most reliable indicators used by many traders on Iq Option.
The Principle Behind Average True Range Indicator.
The idea behind the ATR Indicator is simple! It is about the commonplace forex market fluctuations.
It is true to say that most traders find high market volatility attractive!! This is so because it presents with so many trading opportunities. This is unlike conditions where the market is steady and volatility is limited.
Remember we are not talking about the market trend here.
What we are talking about is an indicator that can signal you when a trend is to begin, by showing you how volatile the market is. The ATR.
At times when volatility is so much, trend direction may not even matter in your profitable trading. You can utilize volatility to earn a lot of profits without actually acknowledging the trend!
And how is that even possible you ask? By leveraging the ATR indicator.
Let’s look at the concept of the True Range so we can fully understand the Average True Range.
To get the True Range, calculate the following;
- Current high minus Current low.
- Present high minus Previous Closing price.
- Current low minus Previous Closing price.
The highest you get out of the three sets of calculations is the True Range. (Don’t beat yourself up trying to calculate all that, the ATR indicator will do the calculations for you).
Having understood True Range, let us now get to understand the Average True Range. Average True Range is a moving average of the True Range.
Therefore, if for example, ATR is set at 14 periods, that means that the True Range is divided by 14 to get the Average True Range!!
How to Set Up Average True Range Indicator on Iq Option.
Set Up the Average True Range Indicator on Iq Option in the following steps.
- Log in to your Iq Option trading account.
- Locate the Tools Tab at the bottom of the interface – Scissors like.
- Hit the Tools Tab.
- Select Indicators from the Options that pop up. A list of Indicators will appear.
- Move your cursor to popular and select ATR from the list.
- A pop up will appear for you to modify the period, thickness, and color of the Indicator.
- Hit the Apply button once you adjust those parameters.
- A continuous line will appear at the bottom part of the interface below the chart.
ATR is ready for use!!!
Using the Average True Range Indicator to trade Forex on Iq Option.
We have repetitively mentioned that the Average True Range Indicator is a measure of market volatility.
In measuring volatility, the ATR indicator actually helps traders gauge points of entry and exit from the market.
Ideally, most traders prefer high volatility market conditions because they offer so many trading opportunities. That is unlike steady and minimal volatility conditions which are characterized by small price fluctuations and therefore difficult to trade.
High market volatility will mean that the price is moving in huge strides towards a particular direction. Low market volatility, on the other hand, will mean that the market is moving only slightly towards a particular direction.
Now, (you as a trader), under which market conditions between the two would you rather place trades?
During high market volatility of course! That is so because there are significant price movements in high volatility markets.
In Iq Option price charts, periods of high and those of low volatility intermingle when the market is unstable offering traders so many trading opportunities.
If you can identify periods of high volatility, then you will most probably profit trading.
On the flip side, if you also can identify periods of low volatility, you will stay back and limit your trading actions!! This is so because of the unpredictability and slow movement that comes with such periods.
How then, can you identify periods of high and those of low volatility?
Of course by applying the ATR Indicator on Iq Option.
Do you have the ATR on your IQ Option trading chart already? Great!
Now, look at the ATR line.
If the Average True Range line goes up, then that’s a symbol that volatility is on the rise. On the other hand, if the line gravitates or goes down, it says that volatility is reducing and the market is becoming stable and steady!!
If volatility is high, employ a working trading strategy to benefit from the markets.
Conversely, if volatility is low, minimize your trading actions and thank me later!!
The longer the ATR period you set, the more accurate the indicator will be. It will filter out the smallest fluctuations to avoid misleading signals.
The opposite is also true. A short period of ATR is likely to be inaccurate. You may receive so many signals which are not as accurate as you would want. Iq Option recommends that you use ATR Indicator in the default setting of 14 periods!!
You have now known how to check market volatility, when it is low and when it is high, using the Average True Range Indicator.
Apply the indicator today and win big with Iq Option!! Take advantage of high volatility market conditions!!!
Realize that if you are looking for trends, the Average True Range Indicator is not the tool. ATR Indicator is strictly a volatility measuring tool!!
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