The ATR (Average True Range) Bands indicator in MetaTrader is an indicator based on volatility that incorporates an average True Range (ATR) to measure the market’s volatility.
This indicator can be useful as a great indicator of volatility, a dynamic support and resistance instrument, tool for trend analysis and even a tool for trend reversal. For instance, it expands and contracts to represent high and low volatility in the cost that the investment is.
Although the indicator appears similar to the well-known Bollinger Bands, it slightly differs in the way it functions. Both the upper and lower band of this indicator indicate the higher and lower ranges of price. Therefore, the bands are calculated using the median real value of the market.
In essence it is that ATR Bands indicator is essentially a simple formula. ATR Bands indicator relies on the true range of the price to determine the market’s volatility. In addition, it helps you identify the best zones for trade entry and exits. This is far superior to Bollinger Bands that are standard due to the significant function of the ATR.
In addition it is simple to use, making it suitable for beginners, intermediate or advanced Forex traders. Furthermore is that it can be used for a variety of strategies like scalping, day/intraday or swing trading.
How to Trade With The ATR Bands Indicator
This indicator is not suggested to be used alone instead, but in conjunction with other technical indicators and price action to increase effectiveness.
BUY Signal First, look for price to move to the lower end of the indicator, then be on the lookout for price reversals on the other side. In this case you can start a BUY/LONG trade when price action prints the pattern of a bullish reversal candlestick (e.g. bullish engulfing).
Sell Signal First, watch for price rise towards the upper part of the indicator. Then, look out for price reversals towards the negative. If this happens you can start a SELL/SHORT trade when price action prints the bearish reversal candlestick pattern (e.g. bearish wrapping).
This ATR Bands indicator that is available for MT4 can be used to determine the level of volatility associated with an underlying trend, and to optimize trade entry and exit. It is among the most effective trading tools for identifying trend reversals breakouts, volatility, as well as the trend’s continuation.