The Average True Range indicator was developed by J. Welles Wilder.
The ATR indicator for Metatrader 4 measures the volatility of any currency pair or any other trading instrument that can be displayed on MT4.
The calculation of the indicator goes as follows:
Current ATR (value) = ((Prior ATR x 13) + Current TR)) / 14
This information is very useful if you want to look at how a currency pair’s volatility increases or decreases over time.
Traders use the ATR for the placement of stop losses and to calculate take profit targets in a simple yet effective way.
Free Download
Download the “ATR.mq4” MT4 indicator
Indicator Chart (EUR/USD M5)
The EUR/USD 5-minute chart below shows the Average True Range forex indicator in action.
Basic Trading Signals
The ATR indicator does not deliver any buy and sell forex trading signals, nor does it indicate where the trend is heading, up or down.
The ATR indicator is used to measure volatility and traders use this information for stop loss placement and the easy calculation of take profit targets.
ATR and Trend Predictor MT4 Forex Scalping Strategy
This MT4 scalping strategy combines volatility-based risk management with trend signals using the Average True Range (ATR) MT4 Forex Indicator and the Trend Predictor V1.0 MT4 Forex Indicator.
The ATR indicator helps calculate dynamic stop loss and take profit levels based on current market volatility, ensuring that trades have enough room to move while minimizing risk.
The Trend Predictor shows blue arrows for buy signals and red arrows for sell signals.
Combining these indicators allows traders to scalp small, high-probability moves while managing risk efficiently across M1 and M5 charts.
Buy Entry Rules
- Wait for a blue arrow to appear on the Trend Predictor, indicating a bullish signal.
- Confirm that the price trend aligns with the signal direction.
- Enter a buy trade at the close of the candle with the blue arrow.
- Set a tight stop loss using the ATR to place it below recent support or a multiple of the ATR value.
- Set take profit using the ATR to target a reasonable move relative to current volatility or exit when a red arrow appears.
Sell Entry Rules
- Wait for a red arrow to appear on the Trend Predictor, indicating a bearish signal.
- Confirm that the price trend aligns with the signal direction.
- Enter a sell trade at the close of the candle with the red arrow.
- Set a tight stop loss using the ATR above recent resistance or a multiple of the ATR value.
- Set take profit using the ATR or exit when a blue arrow appears.
Advantages
- Dynamic stop loss and take profit levels reduce the chance of being stopped out prematurely.
- Trend Predictor provides easy-to-read buy and sell signals.
- Works well on M1 and M5 charts for fast scalping opportunities.
- Combining volatility and trend reduces risk in unpredictable markets.
- Flexible for multiple currency pairs without adjusting settings.
- Helps capture small intraday moves with defined exit rules.
- Reduces guesswork in determining proper trade sizing relative to market volatility.
- Improves the probability of profitable trades by following trend signals.
- Simple and fast to implement for active traders.
Drawbacks
- Trend Predictor signals may lag slightly in extremely fast-moving markets.
- ATR-based stop losses may need adjustment in highly volatile news events.
- Sideways or low volatility markets can produce multiple false signals.
- Scalping on M1 and M5 charts requires constant attention and quick decision-making.
- Improper ATR settings may result in stop loss being too tight or too wide.
- Some currency pairs with irregular volatility may produce inconsistent results.
Example Case Study 1
On EURUSD M1, a blue arrow appeared on the Trend Predictor indicating a buy.
A trade was entered at candle close with an ATR-based stop loss set 3 pips below recent support.
Price moved slowly upward and the trade was closed when a red arrow appeared, capturing a 12 pip scalp.
Using ATR allowed the stop loss to adapt to current volatility and protect the trade.
Example Case Study 2
On GBPJPY M5, a red arrow formed on the Trend Predictor signaling a sell.
A sell trade was entered at candle close with an ATR-based stop above recent resistance.
Price declined steadily, and the trade was closed when a blue arrow appeared, securing a 27 pip profit.
Combining trend direction with ATR-based risk management captured a safe and profitable intraday move.
Strategy Tips
- Adjust ATR multipliers to account for current market volatility on M1 and M5 charts.
- Take partial profits during strong trends to protect gains while letting the rest run.
- Use alerts for Trend Predictor arrows to avoid missing fast scalping opportunities.
- Confirm trade direction with higher timeframe trends for added confidence.
- Avoid trading during high-impact news events to minimize sudden volatility risks.
- Scale position sizes according to ATR values to manage risk effectively.
- Combine with support and resistance levels to improve timing and exit strategy.
- Be patient and only take trades that fully align with both trend and ATR-based risk management rules.
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Download the “ATR.mq4” Metatrader 4 indicator
MT4 Indicator Characteristics
Currency pairs: Any
Platform: Metatrader 4
Type: chart pattern indicator
Customization options: Variable (ATR Period: default period value = 14) Colors, width & Style.
Time frames: 1-Minute, 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day, 1-Week, 1-Month
Type: volatility
