Hey everybody all right! So today we're going to do a day trading terminology session and the term of the day is ATR also known as Average True Range All right now. this is a technical indicator that I use on a pretty regular basis in my trading. So it's important to understand how the ATR works and what type of information you can derive from this technical indicator. So you can see here: ATR the average True range.

It's a technical indicator that tells us the average price range that a stock will typically trade in, so that helps us understand historical levels of volatility and whether or not the stock trades in a range that we would consider giving us the potential for profit. So if I back out of here and show you some examples, this is ATR the blue line right down here. This is the ATR on the 5-minute chart. This is the ATR on the daily chart and you can see the ATR is pretty quick to respond to big big moves in price.

So today is a big day and the ATR went up significantly. Now that's based on the ATR period. If you use a longer ATR period, it's going to be a little slower to react depending on on how long you want to go. But a lot of people 14 days is the standard.

Some people might use a little longer than that, but ATR 14 is is fine. So what this tells us is that today we have an ATR at 52 cents the average true range. Now that's averaging over the last 14 days and today we're up to 52 cents. The ATR yesterday in the previous day in the 30s, 37 cents, 39 cents, 36 cents.

All right. So this stock on an average day, trades in a range of about 30 cents. Well, as a day trader, we know that we're looking to get in stocks that have the potential to move 20 or 30 percent. So in a lot of ways, ATR is not a good indicator of those types of potential moves because those moves are not based on ATR they're based on a catalyst, some type of news.

But ATR can help us understand how volatile these stocks are on any given day. So let's look at a couple stocks that we might you familiar with hears Bank of America. This is a stock that's $20 stock and trades in ATR of about 50 cents. Pretty pretty steady the last month or so with a 50 cent ATR Let's look at another stock here is First Solar.

This is a little more expensive in this trades with ATR of $1 30. So on any given day this moves on average a dollar 30 from the top to the bottom. So if you're looking for an opportunity to scalp with let's say a thousand shares, you know that's about $1300 of potential from the very top to the very bottom, right? So that gives us an understanding that this is a stock that we could probably trade on an intraday basis if we saw a good set up. Even though I'm much more partial to looking for stocks that are experiencing daily breakouts, some stocks that trade with really large ATRs can be traded every single day.

It's not something that I would find to be easy to do, but look at, you know Tesla This trades with a $5 and seventy three cent ATR So on any given day it moves that much. Now if you're a trader with deep pockets and you can buy you know, a thousand shares of this for a flat-top breakout, this is a pretty clean flat top breakout setup. At 208, you know, from 208 we squeezed up to let's see, just under 209. so you know it didn't end up being the biggest breakout.

I'm considering how much money you'd have to have in the trade, but of course the gap and goes set up on this. It gapped up, broke over the pre-market high of 204 and squeezed all the way up to 208. So you know that right? There's a four-point move. Thousand shares.

It's four thousand dollars. But most traders with smaller accounts are not going to be trading stocks like Tesla or First Solar on a daily basis. So the way we use ATR instead, although you can use it, you know to look at stocks that you can create a scanner. For instance, where you're going to say well show me a list of stocks with a really large ATR So let's just do this.

for example Here we'll go in here to advanced and I'll say under specific filters I'll say ATR her Average True Range There we go. So average True Range Let's say I only want to see stocks from the average true range of at least a dollar, but I still want to look for stocks that have lower float. So I'll put the float. Let's say just two hundred million shares as the max.

Alright, I'm going to take away the gap requirement priced anywhere from a dollar to any No Limit Alright, now this is going to give me a list of all of those stocks. Alright, so this we're going to call this hi ATR stocks and let's also add a column here for ATR and then we can search these by the high ATR Alright, so let's see what this gives us. I Would think there would be some stocks in here that meet this criteria, but right now it's not giving us anything. So let me go in and maybe I'll take out.

Oh I think I put the float for two hundred thousand, Two hundred thousand. That was the problem. There's 200 million. Ok, so let's try this again.

There we go. That looks better. So these are stocks that trade with an ATR and let's just drag this over. Here's our ATR of a dollar 61.

Now you know on the one hand this is a stock sgy that trades with a really big ATR That's a big ATR for a twelve dollar stock. So it's a stock that does move quite a lot. And look some of these opportunities, the bull flags and stuff like that. you know you get a pullback and it's a stock that moves.

You can see the same exact pattern on a stock like Siri but you're not going to get the same breakout because this is such a bum. This one's even too thin. but you get maybe on a stock like Sprint here, but that same breakouts only going to give you like a four cent move. so it's not enough to profit from.

So then using this: ATR I Could you know double click this and search by largest ATR Okay, so these are stocks that move a lot on the top-end SW They're sorry Cwe I Let's look at that one. it's a $10 stock or $110 stock 11 million share float right here. We've got a little bit of a flat top set up and you can see between the bottom and top of this move. You know it's a two-point push, but it's very thinly traded.

The volumes pretty light, so if we were truly trying to find a list of stocks to trade, we would probably want to go into the configure tab advanced and add a filter for average daily volume. So let's just do that: average daily volume, ten-day add filter and let's just put it at 500,000 shares minimum. This one might still meet it, but we'll just try to filter this down a little bit more so that took away. We don't have too many low flow stocks on here.

You can see this one's the lowest float maybe I can search by by float as well. So lower float stocks with high ATRs These are stocks that move quite a bit so sgy we know s and D fairly volatile airg. So again, this gives us kind of a sense of stocks that might be worth keeping an eye on. Now one of the other things that I do and let me just pop this up is I use ATR for the Warrior windows which is a technical indicator that's on the daily chart.

So let me let me pull up a stock. let's look at Fred for instance. I'm actually curious about why this isn't on here. Sometimes that you signal can be a little finicky with the with its indicators.

it pops them on and off. so day trade warrior right here. the windows apply. Close all right.

Well I don't know what the deal is that probably have to restart, but in any case, what I do when I'm looking at charts is I look to the left and I look up and I try to form I Get the sense of are there areas that you know have big pockets? Let's actually look at Skl and this is a good one. So SK Ln here if I zoom this in to do to do, you'll see the windows populating on this one. So these are the green lines. So the way these windows are programmed.

this is a proprietary scanner that we have. It's going to automatically draw green lines when we have large windows. this I would consider a large window. But how do you really define a window well? I look at the ATR of the stock and so I look at the ATR and I want to see that in between a level of support and resistance.

we have the full ATR of a stock. So this is a $0.79 ATR So that means this needs to be at least 79 cents here. If it's bigger than 79 cents, the scanner will automatically draw a line at the bottom and top of the window and then this also has another 79 cents to here. And so there's another line but this one's red because it doesn't open up to another window.

So when I go in here I can actually you know adjust my settings the ATR period. The multiplier. Let's say I'm thinking oh well I Want to I Want to see smaller windows on this one so I could use a smaller ATR And now I'm seeing more windows, right? So this is this is drawing like a little window here. between the high of yesterday of 388 and the high of the previous day, which is 420.

So this is for me, kind of. The value of ATR is that I can get a sense on the daily chart of when we had big days. so when a stock moved beyond its typical range on any given day, that tells me it was a day that it was trading at extremes. And so that's a day when we look back on the chart that we're likely to see a big window, a large gap, or something like that.

All right. So hopefully this helps you guys understand. ATR it's an indicator you can pop on your charts I Use it on the daily chart. You can use it on the 5-minute as well, but I don't personally use it on the 5-minute I Don't find it to be particularly helpful.

You know the only thing that you could say is like oh, you know the stock. The five-minute ATR is 51 cents. Some people would look at that and say well, I'll base my stop a reasonable stop on the ATR but again, I I wouldn't like to do that I'd rather use the proper stop on the chart which will be like the low of the five minute candle or you know, something like that. Alright guys, so any questions I'll answer them in the comments below.

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