Trend trading forex using ATR Strategy on the GBPUSD resulted in a gain of 57 pips or $285 (per contract).
Trend Trading Forex Using ATR Strategy Rules
The higher timeframe 45 minute chart was clearly showing a downtrend. This means that traders should focus only on shorts unless a magenta peak on the ADX is formed. Since there was no ADX magenta peak, only trades that were at the ATR on the 3 minute to the short side would be allowed. Then a 5 tick offset from the ATR is used as a stop on the initial entry bar. The 5 tick offset (red line on the chart below) is used until there is at least a fifteen pip profit target. Once the fifteen pip target is hit, an aggressive stop kicks in (yellow line on the chart). If price touches the yellow line, an exit is generated. Simple, effect rules for trend trading forex using the ATR strategy.
Four entries were generated on the chart. All four trades, with entry at the ATR stop loss, were successful. The profit achieved on each was:
- 15 pips
- 12 pips
- 17 pips
- 13 pips
The combined profit for all four trades was $285 based on trading one contract each. Click on the chart to expand.
Notice how the entries are generated on the pullback, which is also your lowest point of risk. Then the aggressive stop pulls in so that you do not give back profits. Although you may not get out right at the bottom of a wave down, your job as a trader is to make profits and that is exactly what you did if you were trend trading forex using the ATR strategy. The entries are at the lowest point of risk, the stop moves down as price progresses, and the aggressive stop ensures you do not give back profits. This is a winning combination! And, it works on any market and any timeframe. The larger the timeframe the larger the profits, while still maintaining a lower risk entry methodology.