ATR Trailing Stop

The ATR Trailing Stop indicator provides a dynamic exit level by calculating a stop-loss line based on recent price action and market volatility to help traders manage risk.

Usage

The Usage section describes how the script can be used to manage trades and identify potential trend exhaustion.

• Exit Management: Traders typically use the red trailing stop line as a benchmark for closing long positions. If the price closes below this line, it may indicate that the upward momentum has stalled or reversed.
• Trend Monitoring: While price remains above the trailing stop, the current trend is viewed as intact. The indicator follows the price upward, ensuring that gains are protected during trending markets.
• Alert Integration: The script is optimized with alerts that trigger when the price crosses over or under the stop level. This allows users to receive real-time notifications for potential trade exits or entries.

Details

The ATR Trailing Stop is a refactored and visually updated version of a concept originally developed by @flepied.

The tool determines the stop level by identifying the lowest price point of the previous three bars and subtracting a fraction of the market volatility. Specifically, it uses a 20-period Average True Range (ATR) to measure volatility and subtracts one-third of that value from the recent low. This methodology ensures that the stop level is not only sensitive to recent price extremes but also adjusts based on how much the market is currently fluctuating.

Settings

• ATR Length: Defined as 20 in the calculation, this determines the lookback period used to calculate the Average True Range.
• Lookback Period: Defined as 3, this sets the number of previous bars scanned to find the lowest price point for the base of the calculation.
• ATR Multiplier: Set at 1/3, this value determines the width of the volatility buffer subtracted from the price low.

FAQ

What is the primary purpose of the ATR Trailing Stop? The indicator is designed to provide a systematic way to trail a stop-loss, allowing traders to lock in profits while giving the price enough room to breathe based on historical volatility.

Can this indicator be used on any timeframe? Yes, the ATR-based calculation adapts to any timeframe, though the 20-period ATR and 3-period lookback will reflect the volatility and price action specific to the selected interval.

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