einok
msg #87848
- Ignore einok
modified |
2/5/2010 10:59:41 AM
I've been checking out the use of the ATR stop.
What opinions do you all have about setting it?
Say for instance, you see a stock intraday that you want to buy.
If you were to set the stop intraday, would you set it at the prior day's close (less a multiple of the prior days ATR)?
How would it be possible set a stop using the intraday ATR since it is not final? Would you just take the days open less a multiple of the prior days ATR?
I should mention too that this is being done on an option, using a price level on the stock as an exit. So, I am not entering a stock trade for a specific price per share.
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gmg733
788 posts
msg #87902
- Ignore gmg733 |
2/6/2010 4:08:05 PM
Some swing traders use 2x the ATR on the prior or current day low which ever is lower, assuming a long. You'll need to convert this to options pricing. If you are using options where delta is equal to 1, should be very easy to convert.
Hope this helps.
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einok
msg #87911
- Ignore einok
modified |
2/6/2010 10:26:43 PM
I was thinking if I enter intraday, I would use the following:
Prior days low or close
Multiple of ATR (either 1.5 to 2)
Subtract the ATR value from the prior days low (assuming long position here) or close
This would be a swing trade (3-7 days), so I was figuring I might use ATR(5 day). Does this sound good?
What about just using the straight ATR value and not a multiple? If you are able to watch the stock intraday, it seems to me that using the straight ATR value should be OK and not get you kicked out of the trade if you don't set a stop with the broker and just use a mental stop AND stick to it.
Like I mentioned this is intraday, so I wouldn't have the final low, close, or ATR value until the end of the day. Would it be a good idea to enter the prior days information as an initial safety stop, just in case something happens before the end of the day?
If nothing were to happen, then I could change the stop using the entry days values once those figures are final.
Thoughts?
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gmg733
788 posts
msg #87927
- Ignore gmg733 |
2/7/2010 1:40:22 PM
I think you are on the right path and ATR(5) sounds about right.
You'll want a multiple to keep you from getting prematurely stopped out. If you google ATR stops you see many examples of how people use it and most all use a 1.5 to 2.0x multiplier.
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