Trading Gold and Trading Dow this morning using the ATR strategy with an aggressive stop allowed traders to increase their risk to reward ratio. The trade setups were fairly simple. The ATR is the plus sign on the chart. The cyan dots are is where the strategy entered, the solid red line is the stop on entry and the yellow dotted line is the aggressive stop.
Trading Gold and Increasing Risk to Reward
On Gold, although the 180 minute had a magenta peak on it, the ADX had gone flat indicating that a new high would actually come in. The 3 and 45 minute lined up great for a trend trade (45 minute ATR is blue and 3 minute shows a test of the blue ATR). The strategy generated an entry on the 3 minute at 1072.6 and the stop was set 5 ticks below the ATR. While the regular stopped pulled up with price, it took longer on the aggressive stop to kick in. The aggressive stop took some time to kick in but once the ADX went magenta it pulled up very quickly. We stayed with the trade until the exit was generated at 1077.7.
Trading Dow Jones and Increasing Risk to Reward
While we were in that trade, another trade on the Dow Jones came in. The 45 minute had made a magenta peak, and price was retracing to the ATR. However, the 180 minute had an ATR directly above it, as well. On the 3 minute chart an entry was generated that required 15 ticks of risk. Using the Aggressive Stop for exit, the trade had a gain of 111 ticks. By following the Aggressive Stop (Yellow Dotted line) the trader could increase the risk to reward to 1 to 7.4.