Day Trading Futures Using the ATR for entry after an ADX magenta peak gives a nice entry into the retracement to the ATR on the 45 minute chart.  The criteria for trade entry is:

  • Higher timeframe chart must show a potential ADX magenta peak will appear (or may already be plotted on the chart)
  • Lower timeframe must have the opposite color ATR
    • If the ATR on the higher timeframe is red, then the lower timerframe must be blue on the lower timeframe
    • If the ATR on the higher timeframe is blue, then the lower timeframe must be red on the lower timeframe
  • Price has to retest the ATR

Profit potential is measured from entry to the ATR on the higher timeframe.  If the number of ticks to the ATR on the higher timeframe is less than fifty ticks, then you may want to bypass the trade (depending on which session you are in and volatility) because the ATR pulls towards price.  That means if you start with fifty ticks and the ATR pulls toward price, then you will more likely than not, only be able to capture ten to twenty ticks of profit.

Day Trading Futures Using the ATR for Entry

The charts below shows the trades on the ES and Dow.  In this example, the ADX magenta peak has already plotted on the higher timeframe.  Price should go up towards the ATR on that chart.

The lower timeframe flips the ATR stop indicator to blue (higher timeframe ATR is red) and price retests the ATR giving an entry.  Also, notice that the Congestion Dots, (white dots on the charts), indicate that price is in essence searching for an area to support the upward movement.  While initially you would use the solid red line as a stop, notice how quickly the Aggressive Stop moves up once price starts moving.  The entries and exits are shown on both charts.

Day Trading Futures Using the ATR for Entry