How to use the ATR indicator to manage trading risk

Hello friends of @Prject.HOPE, in attention to the thematic line developed on how to use the ATR indicator, in this opportunity I will be sharing technical information on, how to use the ATR indicator to manage trading risk.

A common element among traders is that most use a form of risk reward with profit and loss targets, the classic example is to risk 1 and seek 2 rewards, for which they set Take Profit and Stop Loss levels to suit their market entry and exit strategies.

One of the many ways to use the ATR indicator to manage trading risk can be found in the following price action of the TRX/USDT pair, given that the price has already dropped significantly and has moved close to the mean, it is more likely that the price will gain new momentum and stay within the already established price range.

So, after the fall and when the price is already close to the peak of the ART line, buying is probably a good option by setting Stop Loss and Take Profit levels as shown in the following image.

Another way, is the price has already risen significantly and has moved above the mean, it is more likely that the price will take correct, so, after the rise and when the price is already near the peak of the ART line, selling is probably a good option by setting Stop Loss and Take Profit levels as seen in the following image of the price action of the TFUEL/USDT pair.

In the next post I will develop everything related to how the ATR indicator allows us to highlight the strength of a trend and identify any signs of change in the trend itself.

Cory Mitchell How Average True Range (ATR) Can Improve Your Trading. Link

The cover image was designed by the author: @lupafilotaxia, incorporating image: TradingView