Atr Trailing Stop Thinkorswim Tutorial and Guide

Thinkorswim's ATR Trailing Stop is a powerful tool for protecting profits and limiting losses. This feature allows you to set a stop loss based on the Average True Range (ATR), which is a measure of volatility.

The ATR indicator is calculated by taking the average of the true range over a specified period, usually 14 periods. This value is then used to set the stop loss distance.

To set up an ATR Trailing Stop in Thinkorswim, you'll need to create a new strategy or edit an existing one.

Thinkorswim offers a range of ATR settings, including different time periods and multiplier options.

The ATR Trailing Stop is a dynamic stop-loss order that adjusts to changes in the asset's price, making it useful in managing risk. It's based on the Average True Range (ATR), a technical indicator that measures volatility.

The ATR is calculated using one of three methods, depending on how the candles are formed. For example, if the current candle's range is larger than the previous candle, method 1 is used, which calculates the ATR as the current high less the current low.

The ATR Trailing Stop takes the ATR value and multiplies it by a specific factor to determine the distance of the stop-loss order from the current price. This factor can be adjusted, but a common setting is 2 times the ATR value.

If the price moves in favor of the trade, the stop-loss order is moved closer to the current price, maintaining a distance of the specified factor times the ATR value. For instance, if the ATR value is 10 pips and the factor is 2, the initial stop-loss order would be 20 pips from the current price.

The ATR Trailing Stop is a useful tool for managing risk, as it adjusts to changes in the asset's price. If the asset's price becomes more volatile, the stop-loss order will be moved further away from the current price, reducing the risk of being stopped prematurely.

Here's a summary of the ATR Trailing Stop settings:

The ATR Trailing Stop is a dynamic stop-loss order that adjusts to changes in the asset's price, making it useful in managing risk.

The ATR Trailing Stop is a dynamic stop-loss order that adjusts to changes in the asset's price, making it useful in managing risk. This is achieved by multiplying the Average True Range (ATR) by a specific factor to determine the distance of the stop-loss order from the current price.

The ATR Trailing Stop is particularly useful in identifying exit signals for both short and long positions. For a long position, the exit position will be a sell position when prices cross below the trailing line created by the ATR.

The ATR Trailing Stop can be used in conjunction with a trend filter, such as a 63-day exponential moving average (MA), to help identify when to go short. When the price gets closed below the ATR but the exponential average remains close, it's a signal to go short.

The Average True Range (ATR) is a volatility indicator that measures the price movement of an asset over a specific period.

It was first introduced by J. Welles Wilder in 1978 and is calculated using one of three methods, depending on how the candles are formed.

The ATR value is determined by the range of the candles, with larger ranges resulting in higher ATR values and vice versa.

The ATR is a key component of the ATR Trailing Stop, which sets stop-loss orders based on the degree of price volatility.

By using the ATR, traders can protect their capital and lock in profits on individual trades.

The ATR Trailing Stop takes the ATR value and multiplies it by a specific factor to determine the distance of the stop-loss order from the current price.

This distance is then updated as the price moves in favor of the trade, trailing the price at a set distance.

For example, if a trader sets an ATR Trailing Stop of 2 times the ATR value, and the ATR value is 10 pips, the initial stop-loss order would be 20 pips from the current price.

The ATR Trailing Stop is a dynamic stop-loss order that adjusts to changes in the asset's price, making it useful in managing risk and protecting profits.

As the asset's price becomes more volatile, the stop-loss order will be moved further away from the current price, reducing the risk of being stopped prematurely.

Conversely, if the asset's price becomes less volatile, the stop-loss order will be moved closer to the current price, protecting profits.

Let's take a closer look at the ATR Trailing Stop Loss Strategy Example. This strategy is used to identify exit signals for both short and long positions.

For a long position, you'll want to exit when prices cross below the trailing line created by the Average True Range (ATR). This is a clear signal to sell.

The ATR Trailing Stop helps to highlight downtrends, as seen in the graph. It's combined with a 63-day exponential Moving Average (MA) used as a trend filter.

When trading a downtrend, you should go short when the price gets closed below the ATR trend line, but the exponential average remains close. This is a strong indication to enter a short position.

Here are the key takeaways for the ATR Trailing Stop Loss Strategy:

As soon as the price crosses above the ATR trend line, you should exit your short position. This strategy can help you ride out trends and minimize losses.

To get started with ThinkOrSwim, click on the links https://tos.mx/qShvp5 and https://tos.mx/mDtPet, and choose view thinkScript strategy and view Scan Query.

You can rename your strategy as “ATRBreakoutsLE” and save your Scan Query as “ATRBreakouts Scan.”

The loading process is extremely easy, thanks to ThinkOrSwim's proprietary scripting language, thinkscript.

To fine-tune your variables, adjust the parameters of the strategy within the edit studies window.

A sample chart of Verizon (VZ) with the ATRBreakoutsLE strategy added is shown in Figure 4.

We have also added our exit strategies, TrailStopLX with a $1.00 value, based on Calhoun’s article.

For more details about the trading strategy, please see Calhoun’s article in the May 2016 issue of S&C.