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ATR Based Stops by Rajat K. Bose
ATR Based Stops

* Subject: ATR based stops
* From: "Rajat K. Bose" <rajatkbose@xxxxxxxxxxx>
* Date: Mon, 03 May 1999 22:44:00 PDT

Hello RTs,

If any of you could find time, could you just test the efficacy of this Upper and Lower Band based on ATR. The MetaStock formulas are given at the end.

Using the default values used in the formulas, I have found that they provide effective risk control while trading. the upper band can be used as the extreme point to get rid of shorts and vice versa.

In fact, prices tend to remain above both the bands while the market is in a strong uptrend, and prices remain below the bands in a downtrend. During short-term range-bound markets, they tend move between the bands.

I have found this idea in Tushar Chande's "New Technical Trader". It would be be very nice if any of you could comment on them.

Regards,

Rajat K Bose

Rajat K Bose

MetaStock Formulas:

Upper Band

Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Highest High Value",5,20,10);
(HHV(LLV(L,Prd1)+ATR(Prd1),Prd2))

Lower Band

Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Lowest Low Value",5,20,10);
(LLV(HHV(H,Prd1)-ATR(Prd1),Prd2))

{HHV = Highest High Value;
LLV = Lowest Low Value;
Prd1 is a variable that takes the ATR period as well as Lowest Low value period in Upper Band while it takes the Highest High Value for the lower band, Prd2 variable is self explanatory.}

ATR Based Stops

Prd1:=Input("ATR Period",5,20,5);
Prd2:=Input("Period for Highest High Value",5,20,10);
Prd3:=Input("Period for Lowest Low Value",5,20,10);

{Upper Band}
(HHV(LLV(L,Prd1)+ATR(Prd1),Prd2));

{Lower Band}
(LLV(HHV(H,Prd1)-ATR(Prd1),Prd3));

{HHV = Highest High Value;
LLV = Lowest Low Value;
Prd1 is a variable that takes the ATR period as well as Lowest Low value
period in Upper Band while it takes the Highest High Value for the lower
band, Prd2 variable is self explanatory.}

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