Within the PAMM investment system, a PAMM trader or PAMM manager has to deal with market condition in order to make a maximum profit. The trader can be an independent trader or a trader who works for the PAMM investors. The difference is only in the capital they manage.
One of the indicator that help traders to measure the market volatility is Average True Range (ATR). It’s found by Welles Wilder and generally used in daily time frame to measure the daily volatility based on the daily range. ATR is a moving average from the true range of a certain period and generally shown in values format. This indicator doesn’t show the trend bearing, how long a trend will occur, or the trend reversal at all. The ATR movement will automatically work in line with the market volatility. The higher volatility, the higher ATR values. In the real trading, the ATR is used in conjunction with other indicators or tools.
The ATR is based on the true range, which uses fixed price changes. That means ATR reflects market volatiliy in fixed level. So we can simply say that the ATR is not presented as a proportion of the existing close. It’s usually based on 14 periods and can be determining on a daily, weekly or even monthly basis.
True range is the difference between the highest values and the lowest values which is measured in pip within a certain period. If the ATR goes up, it means market is having a high volatility and vice versa. By knowing the measured daily range, PAMM traders
will be able to estimate the current forex pairs movement and determining the risk limit or the stop-loss level.
In the world of trading, discovering the right stop-loss could be a big challenge for many traders, especially the newbies. Once they make mistake in determining the proper stop-loss, it means disaster. The trading is over!
As usually occurs in the high volatility, traders won’t place a tight stop-loss. In the other hand when there is a low volatility, traders won’t put a wide stop-loss because this will cause a bigger risk than the estimated limit. So, as PAMM traders, they need to manage this risk by using an indicator which can guide them to find this confusing stop-loss. The good news is : ATR is one of such indicator needed to ease this job. Moreover, this tool will also help the PAMM traders or PAMM managers to estimate potential profit there is in the market by knowing the average range.
Now, when you are finish reading this article you will understand how to manage risk in trading forex by using ATR.
So, happy trading using PAMM Investments system !
Don’t forget to read this important article for PAMM trader
1. How to become a PAMM Trader
2. Understanding your Forex Trader Level as PAMM Trader