Market Update 09/07/2021, Average True Range
Hello traders and welcome to the market update for the week ending 9th of July 2021 I’m Jay G Vedanta Trader here at the Master the Markets, and a member of the Vedanta Elite trading Team
Today we’re going to talk about the average true range. What is an average true range? What it does, takes the true range of each bar, and puts it into an average to give you a figure after a set number of days. Okay, so in the case of this one here if you look at the indicator here below. You can see it says ATR 14 okay, so the average true range. 14 is the number of days, and it tells you what the average true indicator range is for the last one. Okay. Also, if you hover the mouse over the line itself then you can see it gives you what the range is with a date and time. Okay, and as you can see, whichever bar you are below. If you go to the bar and go below it, it will give you the range for that particular bar. If you’re looking for individual bars, but it measures the number of bars that you have placed in your indicator. Okay. So, average true range, well what is it?
Well, it’s a technical indicator. Okay. It is a technical indicator that many traders will use to give them an idea of what the markets are doing. Okay, a technical indicator, which, when you want to place it on your charts when you need to do is if you go to insert, you get insert list of indicators, and under the indicators there you can see the average true range. Click on that and it will appear on your charts and give you an option to say how many days you want it for, etc. So you can modify it according to your acquired criteria. Okay. Why do we use it?
Well, it gives us an idea of what the markets and what that current asset or instrument is doing basically is measuring the volatility of the charts itself, but what it does is instead of you having to look at it and get an idea of seeing which way the market was what the market is doing, as in buying and selling. It gives you, to you in a diagram of a line here. Okay, now the point to note is the line is not representative of what the markets doing. Okay, because the markets are moving along, according to the price, this is the volatility of the more of that instrument, so it’s going to look at the boss and see what the size of the bar is, and then measure each bar, and give you a long line chart accordingly. Okay, so it’s not a price direction it shows volatility, and the higher the number, the smoother the line gets smaller the number, the more erratic it is because it’s measuring each and every single bar, and giving you a real-time what the average. Okay. Also, by does it say average true range, why not just the average range of the bars. Well, the reason for that is because on the chart, sometimes you will find that there are certain instruments that will often gap. If we look at this now, let me circle, the ones for you that I want you to see are these two bars here, if you look at these two bars there. Okay and also again, let’s look at the two bars here on the coffee instrument. So as you can see the market where it’s closed, and where it’s open, there’s a big, there’s a gap there. You can see that gap there. Okay, where it’s open and very close. So that’s a gap in the market so again here, the closed there and open is there, and you have this gap. So what would happen is if you take the average of just the bars themselves, you would be incorrect because it would just give you the bar average and the range of each bar. However, if you wanted to see what the true average was then you’d have to measure it from this case the high of the bar to the high of this bar. Okay, so from this height to this height would give you the true average. Okay. And that’s why we have to look at this and make sure that if there are any gaps then had been taken into consideration. And that’s what happens on the average true range. So when we look at the average true range, then that gives us the idea of what’s going on. Okay. So we’ve looked at what it is, technical indicator looked at why we look at it, it because it gives us the volatility in the market. Now we’re looking at how do we use it. Okay. The way to use it is what people what some traders will do is they will look at the average true range, and they will take the figures for their stop loss and profit from there. You can set your stop loss
and target figures from the average true range. How do we do that? So, on the current that we’re on at the moment, dollar Swiss, if you look at it. Yesterday, we had the smart money indicator confirmed right on there straight there. And then we’ve got the confirmation dot. Okay, so we looked at it and said, Yep, there’s a confirmation. As for our caching trades, this would be a valid trade, let’s have a look at it. Okay. However, on the caching strategy. One of the criteria, that I do not enter the trade. It gives us an instruction to say that if the bar range, the bar is greater than or equal to 2.5 ATR then, we do not enter the trade. Okay. If it is greater than that, then we do not enter the trade. So what we had to do is yesterday we looked at the charts, And you’ve got the live trading room with Lawrence yesterday.
So when you look at this bar here. The bar range itself. Not sure why the dynamos not showing up on this at the moment. So the ball range for this one is for you to measure it. So you can see itself the bar range from the high to the low is 128. Okay, so it was 128 was the bar range.
Now if I was to look at the ATR for yesterday so this is today’s ATR. Currently, and yesterday on the eight was 46. So, by took the range and measured it. It gives me a figure of 115 is the ATR is 2.5 ATR is 115, and the bar range itself. The high is 9260, and the low is 9132. Yeah, 128 So, plus or minus, so it’s very very close, so the bar range is 128, and the average true range is 125. So very, very close to the figure. And therefore, we didn’t take this trade, because it’s way too close to what we need as a criterion to fulfill this trade, but it’s a big bar and what we do is we avoid taking trades on big bars and this is one of the criteria. So how do we do that we take the ATR? We use that indicator to give us an idea to say, Are we taking the trade or not. And someplace, in some cases, if you do make a trade, you’ll set your stop loss as going to the upside for a short trade to one ATR, or it could go down to the downside, where we used to in the cash and trade, have it as one ATR to go for a profit. Now it moved it to 25 pips because it gives us a better return. So that’s what we’re looking at on the ATR. So average true range, what is it it’s a technical indicator that measures the average true range, so taking into consideration any gaps that may have occurred and market. Why it measures volatility and is also a reference as a reference it’s measures of volatility will, some people or the market referred to it as noise in the market. So that gives us an idea of what the market the instrument is doing that particular instrument. How do we use it, well we place the indicator on our charts, and we set the days that we’re looking at, you know, is it 14 days or 20 days 22 days average trading days in a month. So some people go for a monthly average of 22 days and then look at the charts but you can set it whichever criteria work for you and your strategy. And then once you have the instrument up, You can set your stop loss and target figures from the average true range figures, should you like, Should you wish to according to your strategy. Okay, so that’s the average true range. What I’ll do now is, let’s have a look at the markets and see where they’re going, what’s going on in the market. So let’s move on to your dog, your dollar. Towards the bottom, but now it seems like the open equity is extinguished in here and now we’re looking at, turn to the upside. So, pause, you can pause the pause swing, and now we’re looking at the move to the upside. So, volume is more available to us. On the upside for the eurodollar. The dollar Swiss Swiss Yen is just move got a swing high confirmed seller this probably more moves available to the downside on this. As you can see we’ve had some big biases taking this to a higher level, but it’s highly possible that it’s going to make the correction and come back down to enjoying the current previous level that it was at. So that puts me more move to the downside on the pound dollar open equity is extinguished and we’re looking for a move to the upside. Now, as far as giving us that signal as well. So giving us more probability for pound, dollar, dollar, yen. Again, today’s insider bar so we can all wait to see downside dollar-yen and Aussie dollar a couple of big bars, you know is trending to the downside and now today, it’s turning again, and we’ve got a move coming towards the upside but looking at the opening fatigue on the charts. It’s possible that the opening is distinguished in this for a downward motion so looking at opportunities to the upside for the Aussie dollar.
Copper move with a possible turn occurring. So, looking for opportunities to go to the upside. This was a strong move to the downside of the past few days. Today we’ve seen some signs of weakness in the market, probably an interruption occurring soon. So, there may be just an interruption, and then you might have a continuation pattern going on so then if that’s the case, we’ll take some trades on delete room with this. However, if it does confirm swing low, then we’ll look at the cash and trade to the upside or the euro JPY footsie bit of compression going on inside a bar today not giving us direction so we’ll see if it takes the low than we’re looking at right takes the height and looking for a move to the upside, that at the moment is like compression on the footsie on the Dow Jones to us 30 move to the upside was a pretty bullish move to the upside. And then we’ve got some weakness in the market as well. So now, we’re looking at seeing where it’s going but it looks like it’s possible to move further to the upside on there for us. Coffee. Coffee. Plus one move to the downside, a little bit of consultation going on within the channel there between these three arrows. Not breaking up anything further. He’s already had it’s a good move that was in the past month, went up there, April, May, shall we say. Now, a little bit slow. This week, the market, massive bar which is a confirmation part, and everything else is formed inside that so we’re looking for a breakout of this confirmation bar, And then direction on coffee. But USD, a strong move to the ball to the upside. Bournemouth, slight weakness there but it’s still turning again in showing signs of the upside. However, looking at the number of bars, this would say the open equity has been diminished in this run now, and we’ll be waiting for an opportunity to the downside on their gold. Good strong move to the upside. Again here, on the gold possible some more left before it takes. Bitcoin, a little bit of consolidation mining Bitcoin as well. And it’s had its massive run, and now we’ve got two new lows for the current period, and a bit of consolidation within the channel, you can see there for now. But that said before that. So that’s the market update review for you, and looking at this week’s performances in the lead room on the primary runners. We had nothing on to the prime product 20% Or a strategy on the caching 40% 20 pips and 100 pips. We had 20 pips that we had nothing on the 25th strategy on the caching 100 pips strategy. We had a trade which for us, and a naught point seven 3% to the upside. So as a profit on there was actually a trade that gave us a 1.9% profit but we had another trade that was in a loss, so it balanced out, and it’s given us a naught point seven three to the upside. Nothing on the continuation patterns quick exits on the continuation pattern slow exit we had a naught point two 0% to the upside. But then that brings a total for the elite room at a naught point nine 3% The upside for that. And on the live trading room, the liftoff strategy had nothing for us on the 20 or the 70% This, this week, caching tips are primary, there’s a trade running but not closed out yet so there’s nothing called the primary bond cache in 4.07% or elite, which is also the one day, exit. We had a 1.04% upside. So that’s a profit of 1.04% on there that the total across two rooms the elite room at naught point nine 3% and the live trading room at 1.04% give us a total of 1.97% for both rooms, this week, so that’s a plus to 2% to the upside. So we’re looking at the markets going in our favor again and still got some more trades, running for us, as we speak. So that concludes the market update and leads me to say until the next time, stay disciplined follow the plan and keep trading like a master.