Hey fellow traders, I’ve been grappling with my stop loss strategy for my day trades in the Nifty 50. I find myself getting stopped out too often. Do any of you use the Average True Range (ATR) to set your stop loss and targets? If so, could you share your experience?
Hi there! Yes, I use the ATR indicator to set my stop losses and targets, and it’s really improved my trading strategy. The ATR measures market volatility by calculating the average range between the high and low price over a set number of periods. I’ve found this really helpful in adjusting my stop loss levels based on the volatility of the stock.
Here’s how I typically do it:
ATR Stop Loss: Let’s say the ATR of a Nifty 50 stock is 20 points and I bought the stock at 1500. I usually set my stop loss 2x ATR below my buying price, so in this case, my stop loss would be 1500 - (220) = 1460.
ATR Targets: As for targets, I use 3x ATR above my buying price. So using the previous example, my target would be 1500 + (320) = 1560.
Managing Risk: This strategy helps me manage risk effectively, even in volatile markets. If the stock is more volatile (i.e., a higher ATR), my stop loss and target will be further from my entry point. This means I’m giving the stock more room to ‘breathe’, which prevents me from getting stopped out prematurely.
Remember: ATR values change as market volatility changes, so I regularly update my stop loss and target levels based on the current ATR value.
Remember, no strategy works 100% of the time. It’s all about finding something that works most of the time and sticking with it. The ATR has really helped me in setting realistic and effective stop losses and targets. I hope you find this information useful!
1 Like