The ATR Indicator (Average True Range Indicator) is one of the technical indicators that intends to help the binary options traders in terms of making more money with high payouts. This indicator helps you calculate a simple interpreting value that is based upon the market movements recorded in the past.
In fact, this indicator allows you to gain an idea of the market status and predict what is about to happen next in the graph. The approach intends to focus more on the price action than asset signals. This allows the traders to understand the price movement of a particular financial instrument within a specific period.
Moreover, it will also help you find out the movement fluctuations within a specific, definite period in the past. In this article, you will get a clear idea of how to impose binary options ATR indicator strategy on your trading practices.
Definition of ATR indicator strategy
The approach with this strategy revolves around the range of a specific period. The value of ATR is determined by subtracting the low of the current period from that of its high. Suppose the previous period closure was recorded outside that of the current period. Then the ATR will use the absolute value of high of the current period minus the absolute value of low of the current period minus the closure of the previous period.
ATR repeats the calculation for many periods as per your needs. And then, it calculates the smooth and exponential moving average of all the obtained results. Suppose you are looking for an asset with the current value of $100 for a 1-hour chart, and the ATR reading is 0.2. You can then conclude that the price of an asset has been increased by $0.2 up or down, as per the previous periods.
Hence, this information will help you make better trading predictions and more profits with binary options trading.
How ATR indicator strategy helps Binary Options traders?
As you can predict the range of movement for a binary options asset, you ought to make more accurate predictions. Without such a strategy, you are only left with general high/low trading options that will minimize your profit-earning potential.
With this strategy, you can predict even the minute price movements of an asset, which will help you win maximum profits. But with binary options ATR strategy, you need to predict the distance to which the market will possibly move. As of now, ATR is the best prediction tool for binary options trading aspects.
Here are some of the types of binary options trading and the ATR strategy inclusions upon it. This brief elaboration will help you realize how ATR will help you approach different types of binary options trading:
#1 One-Touch Binary Options trading
With one-touch options, you will be defining a target price! You need to predict if the market will move in the right direction to reach the defined target price. If it touches the target price, then you can get a higher payout immediately.
With the ATR strategy, you can convert the general high/low trading prediction into a one-touch prediction. It is because you will be able to predict the movement range for the price of your select asset. As a result, you will get more frequent profits.
#2 Boundary Binary Options trading
With boundary options trading, you need to define a channel of price, which revolves around the existing market price. You need your option to win, as the market leaves the price channel. It works similar to that of the ladder option, but with two target prices, within an identical distance from the market price.
With ATR, you can predict whether the market will be leaving the price channel or not without any special set of predictions. Hence, this is the only style of trading that will allow you to successfully win the option without the necessity of predicting the market movement direction. So, ATR strategy or style of trading is an ideal approach for maximizing the profit with boundary options trading.
#3 Ladder Binary Options trading
The ladder options trading is like, the high/low option of trading but instead uses a price that is different from that of the market price. And that price will be the point of reference for the trade. With this trading system, you can expect a payout of up to 1500%, depending on broker policies.
The ATR Indicator strategy helps the traders predict whether the market possesses sufficient power to reach the target price range. As a result, you will be able to make better predictions upon ladder trading and earn high profits.
The limitations of Binary Options ATR strategy
So, by now you can conclude by now that ATR has the potential to help you conduct major binary options trading aspects at ease. But, even the binary options ATR Indicator strategy comes with certain limitations, and you need to learn about them as well.
The limitations are:
#1 Range doesn’t equal direction
Even if ATR possesses high value, the market might still not be able to move far enough. If the market lacks direction, then you can just alternate the period between upward and downward phases. Hence, it will keep the market at the required position.
#2 The Market environments do change
ATR is prone to tell you only the information that has happened in the past. The future might result differently! Therefore, it is important for you to stay updated with the current market news upon your select asset. Hence it will help you to support the binary options ATR strategy.
Tips for using ATR strategy on Binary Options trading
Here are some of the concluding tips that will help you out with the better implementation of binary options ATR Indicator strategy:
- Use it to identify multi-year low volatility for breakout trades.
- Market breaking with 2 ATR or more means it tends to be exhausted and might just reverse.
- Set your stop-loss X ATR away from the low or maxima levels if you wish to follow the trend.
These are a few of the details that elaborate the concept of ATR strategy for binary options trading. If you intend to use it, then get a nominal experience of this trading journey. And then, you will be able to get profit out of it.