What it is
The average true range (ATR) is the market's normal candle size. Setting a stop as a multiple of ATR means it adapts: wider in fast markets, tighter in quiet ones, so the same rule works on gold, indices and forex.
This version ratchets. In an uptrend it can only move up, and when price closes below it, the trend is treated as over and the stop jumps above price to follow the new downtrend. WickSpeak draws it as dots so you can see the flips clearly.
How it is calculated
1. Work out ATR over 14 candles. 2. For a long stop, take the close minus 2.5 times ATR. For a short stop, the close plus 2.5 times ATR. 3. While long, the stop is the higher of yesterday's stop and today's new value, so it never falls. 4. If a candle closes below the long stop, flip to short and set the stop at close plus 2.5 times ATR. 5. While short, the stop is the lower of yesterday's and today's value, and flips back to long on a close above it.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Length | 14 | 1 to 200 | Candles in the ATR. Shorter makes the distance react quickly to a change in volatility. |
| Multiplier | 2.5 | 0.5 to 10 | ATRs between price and the stop. 1.5 to 2 is tight, 3 or more is loose and suits long swings. |
How to read it
How to trade it
- 1
On a 1 hour gold chart, treat a flip to the long side as permission to look for buys, not as a blind entry.
- 2
Enter on the flip candle's close if it is not far from the stop, otherwise wait for a pull-back towards the dots.
- 3
Your stop is the dots. With defaults on 1 hour gold that is often 12 to 20 points away.
- 4
Move your stop to each new dot level after every close. Exit when price closes below the dots.
- 5
On US30 use it the same way for shorts after a flip above price.
A long held with the ATR trailing stop is proved wrong the moment a candle closes below the stop; that close is the exit and the flip to the short side.
WickSpeak runs in your browser with nothing to install. When you add the ATR trailing stop, it writes a plain-English reading on the live candle: what the indicator is, what it is doing right now, how to trade it and what would prove that reading wrong. It says which side the stop is on, how many points away it is, and whether it just flipped.
In Playbook, our no-code strategy builder, the ATR trailing stop can be a condition in a play. It can test whether the ATR trailing stop: flips long; flips short; is bullish; is bearish. Each condition can run on any of 12 timeframes from 1 minute to weekly, combined with up to 11 others, and the play can be backtested on past candles with your own costs and turned into alerts on screen, by email or by phone push. Separately, any play in Playbook can use stops in ATR multiples and trailing stops based on ATR, points or an indicator.
Best markets and timeframes
Works on any market because it scales with volatility. Best on trending conditions in gold and US indices on 15 minute to daily charts.
Common mistakes
- Trading every flip in a sideways market.
- Using the same multiplier on 1 minute and daily charts without testing.
- Overriding the stop by hand when price gets close to it.
Works well with
Questions traders ask
What is a good ATR multiplier for a stop loss?
2 to 3 times ATR is the most common range. 2.5 with a 14 period ATR is WickSpeak's default. Shorter-term traders often use 1.5 to 2, swing traders 3 or more.
How does an ATR trailing stop work?
It sets the stop a multiple of the average candle size away from price and only moves it in your favour. When price closes through it, the trade is closed and the stop flips to the other side.
Is the ATR trailing stop the same as Supertrend?
They are close relatives. Supertrend measures from the candle midpoint and the ATR trailing stop here measures from the close. Both flip when price closes through them.
Should I use the close or the high and low for the flip?
Using the close avoids being flipped by a brief wick. WickSpeak's ATR trailing stop flips only on a close through the line.