Have you ever struggled setting the perfect stop loss? You’re not alone! 🤯 Before, I would focus on percentages to guide my trades, but let’s be honest – it was hit or miss. That all changed when I started using the Average True Range (ATR) to set stop losses. 📊✨
Why ATR, you ask? Well, it’s all about embracing the volatility. Unlike fixed percentages, the ATR method tailors your stop losses based on the market’s current heartbeat – making it a game changer for us short-term traders.
Here’s how I make it work:
1. Three-Screen Setup: Start with analyzing a trending stock on three different chart timeframe to get the full picture.
2. Intermediate Timeframe Focus: I zero in on the intermediate timeframe. Why? Because it strikes the perfect balance, capturing the essence of short-term volatility while filtering out the ‘noise’ – essential for informed decision-making.
3. Applying the ATR Indicator: Next, I apply the ATR indicator to this timeframe. The trick is to evaluate its value – if it’s above or below average gives us a clue on the market’s mood swings.
4. The Multiplier Method: Depending on where the ATR stands, I use a multiplier (between 1 and 3) to adjust its intensity. This number isn’t picked out of a hat – it’s calculated based on the ATR’s deviation from the average.
5. Setting Up the Stop Loss: With the adjusted ATR value in hand, I then subtract this number from my entry point (or current position). This is the crux – determining a stop loss that isn’t just a number but a reflection of the market’s live volatility.
This approach has completely changed my trading strategy, making it a tailored-fit, volatility-responsive safety net. Want to know more about this method? It’s a game-changer for setting stop losses that are truly in tune with the market’s pulse.
Get the full breakdown of this strategy on my YouTube channel, Black Girl Stocks, and elevate your trading game today. The market waits for no one; arm yourself with the knowledge to thrive in it. #StopLoss #DayTrading #Investing #OptionsTrading TechnicalAnalysis #BlackGirlStocks
