Developed by J. Welles Wilder the ATR is very popular with traders. On its own, the ATR can be used to measure market volatility and market range. It is also frequently used in other technical indicators such as the SuperTrend indicator and the ADX. One of the most popular uses for the ATR was developed by Chuck LeBeau and is referred to as the Chandelier Exit. The chandelier exit sets the stop-loss distance as a multiple of the ATR. The ATR reacts to market conditions so when things are calm, the stop-loss will be relatively close and when things are volatile, the stop-loss will be further away.
H-L = High-Low H-PC = abs(High-Previous Close) L-PC = abs(Low-Previous Close) True Range =max(range) ATR =average(range) SL =ATR*Factor Max Weekly Drawdown = Low-Previous Close Trading Strategy =IF(F34>G34,IF(N35>M34,((F34-M34)/F34)*Q34,(F35/F34)*Q34),Q34)
Continuing on from the previous article about how to use excel to backtest a trading…
My name is Mark Ursell, and I am an individual trader and investor. I am continually working on developing new trading strategies and improving my existing strategies. I have developed a series of Excel backtest models, and you can learn more about them on this site.