ATR Trailing Stop v5

The ATR Trailing Stop v5 indicator provides a volatility-based stop-loss mechanism that dynamically adjusts to market conditions by trailing price action using a multiple of the Average True Range (ATR).

Usage

The Usage section describes how the script can be used to manage risk and identify trend reversals. Traders typically use this tool to define exit points for existing positions or to determine the current trend bias.

• Trend Identification: When the price is above the trailing stop line, the trend is considered bullish (typically colored green). When the price is below the line, the trend is considered bearish (typically colored red).
• Stop-Loss Placement: The line acts as a trailing exit. In a long position, the stop moves upward as price increases but never moves downward. In a short position, the stop moves downward as price decreases but never moves upward.
• Strategy Integration: This version is optimized for Pine Script v5, allowing users to integrate the logic into automated strategies. A buy signal is often generated when price crosses over the stop, while a sell signal is generated when price crosses under the stop.

Details

The script calculates the stop level by first determining the Average True Range over a specific lookback period. This value is then multiplied by a user-defined coefficient to set the distance between the price and the stop line.

Unlike traditional fixed-pip or percentage-based trailing stops, the ATR Trailing Stop accounts for the underlying asset's volatility. During periods of high volatility, the stop widens to avoid premature exits; during low volatility, the stop tightens to protect capital. The logic ensures the stop only moves in the direction of the trade (up for longs, down for shorts) until a closing price crosses the level, triggering a "flip" in direction. This implementation is based on original concepts by HPotter and @TradeAutomation.

Settings

• ATR Period: Defines the number of bars used to calculate the Average True Range. A higher period results in a smoother, slower-reacting stop.
• ATR Multiplier: The factor by which the ATR is multiplied to determine the stop distance. Higher multipliers provide more "room" for the trade to breathe, while lower multipliers create a tighter trail.
• Line Width: Adjusts the visual thickness of the trailing stop line on the chart.

FAQ

How does the ATR Trailing Stop differ from a standard trailing stop? A standard trailing stop usually moves by a fixed price amount or percentage. The ATR Trailing Stop is volatility-adjusted, meaning it automatically widens during turbulent markets and tightens during quiet markets to better reflect price behavior.

Can I use this indicator for automated trading? Yes, the script is written in Pine Script v5 and includes alert conditions for "Bullish Flips" and "Bearish Flips," which can be used to trigger external execution platforms or integrated into larger strategy scripts.

How do I access ATR Trailing Stop v5? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.