[isatrader]

Could you please flesh out more so using the ATR. Why it is used, when it used, why you give an ATR percentage range and not just one percentage number, etc. Thanks

Hi Red Barron,

I use the ATR to determine the volatility of a stock, as each stock is unique, so using arbitary percentage numbers like putting the stop loss 6% below is fairly useless as with some stocks, especially small caps, they might have a daily movement of that much. So the ATR is a useful way of adjusting position size and stop loss distances to account for the each stocks unique volatility.

With the examples in the thread, I took them from Stan's Global Trend Alert newsletter. So for example in the following:

In March 2012 Abbott Laboratories (ABT) was recommended as a continuation buy on a pullback towards the 56-57 zone. The Trader Stop Loss was given as 54.49 and the Investor Stop Loss was given as 52.99.

So the reason for the ATR range was that, the entry point wasn't a single figure, but the stop loss position was. So the entry point could have been anywhere from 56 to 57. Hence, if you bought at 57 then it would have a greater distance to the stop loss than if it was bought at 56. So I stated the ATR range, which helped to get an idea of how far Stan would recommend entering a stock from the stop loss position.