USD/CHF Price Analysis: Rallies back above 0.9250 reclaim the 20-DMA as bull’s eye the 50-DMA

The US Dollar strengthens across the FX space, a tailwind for the USD/CHF.
USD/CHF Price Analysis: Shifted to neutral biased once buyers hurdle the 20-DMA.

The USD/CHF is surging sharply during  Friday’s North American session, as Wall Street is set to finish the last trading day of the week with losses. Therefore, the USD/CHF is trading at 0.9260, above its opening price by 1.42%.

USD/CHF Price Analysis: Technical outlook

On Friday, the USD/CHF rally broke two downslope resistance trendlines, which would pave the way for further losses. In addition, the 20-day Exponential Moving Average (EMA) at 0.9210 was reclaimed during the uptrend, exposing crucial resistance levels, which, once cleared it, could pave the way for further gains.

The USD/CHF first resistance will be the January 31 daily high at 0.9288. A breach of the latter and the 0.9307, the 50-day EMA is up for grabs., followed by January’s 12 high at 0.9360.

On the flip side, the USD/CHF first support would be the 20-day EMA at 0.9210. Bears reclaiming the latter would exacerbate a fall below 0.9200, followed by the February 3 daily low at 0.9112.

USD/CHF Key Technical Levels


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XAUUSD: Elliott wave analysis and forecast for 03.02.2023 – 10.02.2023

2023.02.03 2023.02.03
XAUUSD: Elliott wave analysis and forecast for 03.02.2023 – 10.02.2023logo

Main scenario: consider long positions above the level of 1865.40 with a target of 2000.00 – 2050.00 after correction.

Alternative scenario: breakout and consolidation below the level of 1865.40 will allow the pair to continue declining to the levels of 1818.01 – 1772.93.

Analysis: a descending correction appears to have formed as the fourth wave (4) of larger degree on the daily chart, with wave С of (4) completed inside. H4 chart: apparently, the fifth wave (5) started forming, with the first wave of smaller degree 1 of (5) forming inside. Supposedly, wave iii of 1 finished forming on the H1 chart, and a local correction started unfolding as wave iv of 1. If the presumption is correct, the pair will continue to rise to the levels of 2000.00 – 2050.00 once the correction is over. The level of 1865.40 is critical in this scenario as a breakout will enable the pair to continue declining to the levels of 1818.01 – 1772.93.

Price chart of XAUUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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Dow’s Skepticism Anchors Nasdaq Volatility, Dollar Charged by NFPs and Rate Forecasts

Dow, Nasdaq 100, Dollar, USDJPY and Rate Forecasts Talking Points:

The Market Perspective: USDJPY Bullish Above 132.00; EURUSD Bearish Below 108In a week packed with event risk, the strong US NFPs and service sector activity shaped the Fed rate hike interpretation for a distinct Dollar takeWhere the Greenback’s fundamentals seem more direct, the bearings for risk trends as the Dow broods and Nasdaq jumps around are unresolved

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As we look ahead to a new trading week, what is the background mood of the market? An argument can be made by the bulls who point to the general progress made by benchmarks like the Nasdaq 100 over the entirety of this past week – a general push to four-month highs – with justification developed around an impending peak in the major central banks’ tightening cycle and improvement in growth forecasts. Alternatively, bears can draw on the late retreat Friday from the same measures with backing through the erosion of terminal rate discounts. However, these are debate points founded more on belief than tangibility. That means that the ultimate bearing the market takes will be highly contentious and founded more on the collective speculative view and less on scheduled developments.

I long ago resolved myself to the reality that the communal view of the market is what ultimately directs price action. As the saying goes, the ‘market can remain irrational longer than you can solvent’; but the perception of irrationality is itself judgement. That said, there are some underlying aspects to the market that I believe will factor into the overwhelming current of sentiment. The Dow Jones Industrial Average’s refusal to participate in the swell of enthusiasm is remarkable. It wasn’t the only ‘risk’ connected asset not to take part, but the disparity between the Dow (‘value index’) and Nasdaq 100 (‘growth index’) was striking. It perhaps is a result of a resurgence in speculative participation relative to larger market players. The former typically holds a shorter duration and acts on more unconventional reasoning. The latter is more often the foundation for trend development. How can we distinguish market groups? Beyond comparison of close counterparts like Dow-NDX, options activity of retail traders (as a percentage of the entire market) surged to overtake the ‘meme stock’ craze peak this past week.

of clients are net long.

of clients are net short.

Change in






Chart of Dow Jones Industrial Average and ‘Wicks’, Overlaid with the Nasdaq 100 (Daily)

Chart Created on Tradingview Platform

Looking out over next week’s fundamental docket, there is nothing of prominence that would readily be considered capable of redefining broader risk trends – not like the FOMC decision or NFPs that we had this past week. That means that the winds already to our back will converge with unpredictable headlines and organic speculative trends to form whatever systemic trends we ultimately find. For the current fundamental mix, two major events on Friday seemed to materially change the tone of speculation. After the Federal Reserve’s decision this past Wednesday to hike rates 25 basis points and offer rhetoric to suggest it was still on pace for its projected terminal rate, the market was happy to once again discount the authority’s forecast. That changed, however, when the ISM services report for January was released. The world’s largest economy is heavily dependent on service-based businesses for growth and employment, and the past month’s measure jumped much more sharply than expected – alleviating much of the concern of recession associated to the previous month’s surprise slump (below 50.0). While that can be a boon for growth potential, it is also a capital market burden in supporting the Fed’s drive.

Chart of S&P 500 with US Mfg and Service Activity, Overlaid with Official Recessions (Monthly)


Chart Created by John Kicklighter

The prop to Fed forecasts was even more distinctly bolstered by the January labor report. Nonfarm payrolls (NFPs) increased by a net 517,000 which was substantially higher (by 332,000 positions) than the economist consensus. With average hourly earnings growing another 0.3 percent and the jobless rate dropping to a seven decade low, there was a clear divergence in the focus of the central bank’s dual mandate for full employment and stable inflation.

Chart of US Change in Nonfarm Payrolls with Level of ‘Surprise’ Relative to Forecasts (Monthly)


Chart Created by John Kicklighter

There were some remarkable moves to come out of this fundamental mix outside of the US indices. In single shares, the top tech stocks which reported earnings after the close Thursday found Google and Amazon sporting serious reversals while top market cap company Apple weathered the storm with a 2.4 percent gain. US 2-year yields charged 19 basis points higher while gold suffered its biggest drop in six months. From the Dollar, there was a notable rally registered across the spectrum as rate forecasts climbed. From a technical perspective, EURUSD through its break of the rising wedge from November and the 20-day moving average. That said, its fundamental backdrop is not as steady. While the Dollar is looking to maintain a yield advantage through their respective terminal rates, the ECB peak is still ambiguous. USDJPY on the other hand is fairly clear with its yield focus on the US side of the equation (though it is an outlier risk the BOJ surprises again like December). What’s more, this pair is also better aligned to risk trends. Looking into next week, it is possible that ‘risk appetite’ is restored but given we are already buoyant on that front with VIX very low, that development would likely be choppy with limited stretch. A spell of fear on the other hand could come swiftly and exact a serious toll. While we often treat the Yen as a ‘haven’; with USDJPY, there is a positive correlation to the VIX.

of clients are net long.

of clients are net short.

Change in






Chart of USDJPY with 20-Day SMA and Spot-20SMA Disparity (Daily)


Chart Created on Tradingview Platform

While the forthcoming economic docket doesn’t offer much in the way of systemic guidance for the global capital markets, there are nevertheless events for which we should keep track. Monetary policy will likely manifest in more relative consideration rather than a collective perspective (unless sentiment sours). With that said, central bank speak will be a moving target while the Reserve Bank of Australia (RBA) decision will offer the only update from a major player. With AUDUSD dropping, a dovish outlook after an expected hike could exacerbate the rebalance. On the growth / recession side of the conversation, there are secondary indicators galore such as Canadian manufacturing, German industrial production, US economic sentiment and Japanese household spending. Standouts will be Chinese foreign exchange reserves, UK GDP and US consumer sentiment (from the UofM).

Top Global Macro Economic Event Risk for Next Week


Calendar Created by John Kicklighter

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US: Despite the rebound, the breadth of services expansion has still slowed – Wells Fargo

The ISM Service PMI released on Friday showed the index rose back above 50, into expansion territory. Analysts at Wells Fargo, point out that after just a single month under 50, the services ISM shot back up into expansion. However, they warn the breadth of services expansion has still slowed.

Key quotes:

“The slowdown in services activity to end last year now looks more like a blip rather than the start of a lasting slowdown in the sector. That’s at least according to the latest ISM services release, which revealed the index advanced 6.0 points to 55.2 after a temporary drop below 50 in December.”

“While we find it easy to talk away some of the weakness in this report, month-to-month movements in the ISM can be volatile and the breadth of expansion has eased.”

“Most components of the ISM improved, with the measure of business activity up 6.9 points to 60.4 and new orders matching that index level leaping 15.2 points after registering contraction in December. New orders now match the highest level registered over the past 12 months, an indication that activity continues to hold up in the services sector.”

“The easing of supply problems is also somewhat benefiting price pressure. At 67.8 the prices paid index remains firmly in expansion, but it has declined the past four consecutive months.”

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Crude Oil Price Under the Pump in the Face of Fed, ECB and BoE Hikes. Lower WTI?

Crude Oil, US Dollar, WTI, Brent, FOMC, Fed, BoE, ECB. OPEC+ China – Talking Points

Crude oil prices have found some support after a tumultuous weekThe Fed, BoE and ECB tightening has raised recession concernsOPEC+ maintain its target while China resurfaces. Where to for WTI?

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Crude oil has had a torrid week so far with wider market movements overshadowing the optimism of China re-joining the global economy.

The Federal Reserve, the European Central Bank (ECB) and the Bank of England (BoE) all tightened monetary policy in the last few days. While stocks have broadly rallied, black gold has struggled to find support.

The increasingly restrictive stance from central banks globally has contributed to speculation around the probability of a recession in these major economies.

The market interpreted the Fed as potentially nearing the end of its rate hike cycle despite Fed Chair Jerome Powell specifically saying that he did not see a rate cut this year. Interest rate futures and the swaps market have priced in a cut for November.

While the US Dollar has gained ground in the last 24 hours, it continues to languish against other currencies and gold. The DXY index, a broad measure of the US Dollar against a basket of currencies, remains near a 10-month low.

The lower dollar may assist other countries to increase oil demand as it becomes cheaper in their domestic currency.

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Prior to the Fed meeting, data from the Energy Information Administration (EIA) showed inventories increased by 4.1 million barrels last week, well above market estimates.

OPEC+ left production targets unchanged at their gathering this week.

Elsewhere, it is anticipated that Europe will soon introduce further restrictions on Russian refined oil products.

It appears that the outlook for crude is heavily dependent on the smooth transition of China away from its zero-case Covid-19 policy. An increase in demand from the Middle Kingdom might be enough to counterbalance a decrease in consumption in other parts of the world.


After making a 12-month low in December, crude oil has rallied to establish higher highs and higher lows in an ascending trend channel.

Yesterday’s sell-off tested the lower trend line support and that move was rejected. That trend line and the low may provide support near 75.00 ahead of the previous lows at 72.46 and 70.08.

The price has moved below all short, medium and long-term Simple Moving Averages (SMA) this week and that bearish momentum could unfold should the trend line be broken.

While most SMAs have rolled over, the 21-day SMA maintains a positive gradient which might suggest that the market is unclear for directional momentum at this stage. Should that 21-day SMA turn negative, it may indicate that bearish momentum could be unimpeded.

On the topside, resistance might be in the 82.48 – 82.72 area where there is a cluster of prior peaks ahead of the December high of 83.34.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for

To contact Daniel, use the comments section below or @DanMcCathyFX on Twitter

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Pound is deadlocked. Forecast as of 02.02.2023

2023.02.02 2023.02.02
Pound is deadlocked. Forecast as of 02.02.2023logo

No one can confidently say how the BoE will act in February. Inflation is above 10%, which is pushing the central bank to raise interest rates aggressively, but the economy is weak. Let us discuss the Forex outlook and make up a GBPUSD trading plan.

Fundamental pound forecast today

A weak economy, high inflation, and a dispute among the BoE members. It seems that the UK is watching the same first act of the play while the US has already moved on to the second. It doesn’t matter that the BoE started the monetary tightening cycle earlier than the Fed did. It started selling bonds purchased under QE also earlier. Some economists even suggest that the BoE should be the first to pause monetary restrictions after raising the bank rate by half a point in February. However, hardly anyone can say for sure what exactly the regulator will do. And this uncertainty is driving the GBPUSD into consolidation.

Even a major improvement in global risk appetite and a weakening US dollar since the first FOMC meeting in 2023 failed to strengthen the pound. In the UK, unlike the USA, nothing changes. The IMF still considers the UK economy the weakest in the G7, lowers its GDP growth forecast for the current year by 0.9%, and predicts a recession of -0.6%. Given that estimates of global economic growth were raised to 2.9%, one can say that the UK economy and the sterling are under pressure.

Projections for G7 economies

Source: Bloomberg.

Consumers face high energy prices, borrowers face high interest rates on loans, and taxpayers face high taxes – these are named as the main reasons for the downturn. Furthermore, government spending is cut, and the labour market doesn’t suggest much optimism. So, the future of the UK economy doesn’t look so bright.

Nevertheless, pessimistic forecasts are unlikely to stop the Bank of England from the 10th act of monetary restriction in a row and the growth of the interest rate to 4%, the highest level since 2008. Inflation in the UK seems to have passed its peak but is still at an unacceptably high level of 10.5%. It seems that previous steps along the road of tightening monetary policy are not producing results.

Dynamics of leading central banks’ interest rates

Source: Bloomberg.

The stagflationary environment makes BoE more divided than ever. At the December meeting, the majority of MPC members voted in favor of raising borrowing costs by half a point, but one official suggested a wider move, and two others did not want any change. What will happen in February? Will the balance of power change? The derivatives market is not sure about raising the BoE rate by half a point, although it considers this option the most probable. Derivatives lowered expectations for a rate ceiling to 4.5% from 4.75% in November.

GBPUSD trading plan today 

Thus, unlike the Fed, which will soon pause the process of monetary restriction, or the ECB, whose determination in the fight against inflation is not in doubt, the Bank of England is uncertain. It could easily surprise investors with a smaller increase in the bank rate, which will send down the GBPUSD towards 1.225 and 1.22. If the UK regulator meets the market expectations, then medium-term buy targets will remain at 1.268 and 1.28.

Price chart of GBPUSD in real time mode

The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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Gold Prices Rallied as Markets Kept Betting Against the Fed, Now What?

Gold, XAU/USD, Federal Reserve, Technical Analysis – Briefing:

Gold prices rallied the most in almost 2 weeks after the FedMarkets continue to bet against Powell’s rate outlook visionXAU/USD now turns to non-farm payrolls data on Friday

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Gold prices gained 1.14 percent on Wednesday, the most in almost 2 weeks. The yellow metal is on course for a 7th consecutive week of gains. That would be the longest winning streak since the summer of 2020. All eyes were on the Federal Reserve over the past 24 hours, which delivered a 25 basis point rate hike, as expected. That brought benchmark lending rates to a range of 4.50% – 4.75%.

As usual, the focus was on what could come rather than on what occurred. Since the end of last year, markets have been pricing in an increasingly dovish outlook. As a result, the US Dollar and Treasury yields fell as the S&P 500 gained. The Chicago Fed National Financial Conditions Index is at its lowest since the Fed started tightening last year – a sign of easing liquidity in markets despite quantitative tightening.

What did Chair Jerome Powell say? He acknowledged that inflation has eased somewhat but that ‘it remains elevated’. He stressed that the central bank ‘will need to stay restrictive for some time’ and that if the economy performs as expected, policymakers don’t see cuts this year. How did the markets respond?

Despite Powell’s rhetoric, financial markets continued to bet against the central bank. Fed Fund Futures point at 2 rate cuts towards the end of this year. This is as traders added in almost half a cut to the 2-year horizon. On the intraday chart below, you can see the US Dollar falling alongside front-end bond yields. Gold rallied, capitalizing as the ‘anti-fiat’ trading instrument.

Powell was questioned about the recent easing in financial conditions, but his answer left more to be desired. He said that the focus is “not on near-term moves, but on sustained changes”. All things considered; this continues to leave markets vulnerable to disappointment if a pivot becomes increasingly unlikely. To that end, the focus remains on economic data and non-farm payrolls on Friday.

Gold Surges During the Federal Reserve Rate Decision

Gold Technical Analysis

Gold closed at a new high this year, taking out the January peak at 1949.16. That placed XAU/USD closer to the key 1978 – 1998 resistance zone. Negative RSI divergence is present, showing that upside momentum is fading. That can at times precede a turn lower. In such a case, the 20-day Simple Moving Average (SMA) could maintain the upside focus.

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XAU/USD Daily Chart

XAU/USD Daily Chart

Chart Created Using TradingView

— Written by Daniel Dubrovsky, Senior Strategist for

To contact Daniel, follow him on Twitter:@ddubrovskyFX

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Gold Treads Water Ahead of a Cascade of Central Bank Hikes. Where to for XAU/USD?

Gold, XAU/USD, US Dollar, FOMC, DXY Index, ECB, BoE, Crude Oil – Talking Points

The gold price is steady today as markets await central banks actionsThe US Dollar tried higher but pulled back into the range amid uncertaintyThe market is eyeing today’s FOMC meeting. What will it mean for XAU/USD?

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Gold had a look lower at the US$ 1,900 handle in the US session but quickly recovered back above US$ 1,925. At the same time, the DXY Index, a benchmark measure of the US Dollar, moved to higher ground before collapsing into the New York close.

Wall Street had a stellar session on hopes that the Fed Chair Jerome Powell might soften the hawkish stance at today’s Federal Open Market Committee (FOMC) meeting.

Prior to the media blackout, several committee members had been sprouting the message that 25 basis points seemed like the appropriate dosage for tightening and that rates will need to remain high for ‘a long period’.

Interest rate markets have a 25 bp lift baked in. It is the post-meeting commentary that has the potential to set off market moves.

In addition, the European Central Bank (ECB) and the Bank of England (BoE) will be meeting tomorrow, and the market expects both banks to tighten by 50 bp.

Treasury yields slipped a few bps overnight but have done very little through the Asian session today.

The Nasdaq posted a 1.67% gain in its cash session, but futures are indicating a soft start to their day trading.

APAC equities have had a quiet day, although most indices are slightly positive. Likewise, currency markets are lying in wait to see what comes of the Fed meeting, although the Swiss Franc posted solid gains yesterday.

After testing lower levels yesterday, crude oil has held onto the consequent recovery. The WTI futures contract is above US$ 79 bbl while the Brent contract is around US$ 85.80 bbl at the time of going to print.

After the European CPI number, the US will see figures on mortgage applications, employment and the ISM survey. The Fed remains the focus late in the day.

The full economic calendar can be viewed here.

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How to Trade Gold


Gold has dipped below the 10-day simple moving averages (SMA), but remains above all other short, medium and long-term daily SMAs.

This may suggest a pause in short-term bullish momentum, but that underlying medium and long-term bullish momentum remains intact for now. The price remains in an ascending trend channel.

Resistance might be at the recent peak of 1949 or the April 2022 high of 1998.

On the downside, support may lie at the lows of 1900 and 1897 or the breakpoints of 1865 and 1825.

Chart created in TradingView

— Written by Daniel McCarthy, Strategist for

Please contact Daniel via @DanMcCathyFX on Twitter

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TESLA ($TSLA) impulsive rally favors upside [Video]

TESLA (TSLA) showing short term  Elliott wave  impulsive sequence started from 1/06/2023 low. It should remain supported in 3, 7 or 11 swings and extend higher. Short term, it placed ((iv)) correction at 162.78 low against 1/19/2023 low and favors upside in ((v)) of 3 of (3). It proposed ended weekly correction at 101.20 low at weekly blue box area and favors higher or at least can see larger 3 swing larger bounce. It placed (1) at 123.52 high and (2) at 114.92 low. Above there, it favors higher in extended wave (3) and expect further strength to continue. Within (3), it placed 1 at 125.95 high and 2 at 115.64 low. Currently, it favors higher in extended wave 3 of (3) and expect one more leg higher in ((v)) to finish wave 3.

In wave 3, it favored ended ((i)) at 137.50 high and ((ii)) at 124.31 low as 0.618  Fibonacci retracement  against ((i)). Above there, it extends higher in wave ((iii)), which ended at 180.68 high as 2.618 Fibonacci extension of wave ((i)). It proposed ended ((iv)) at 162.78 low in 3 swing pullback. It placed (a) at 166 low, (b) at 178.05 high and finally ended (c) of ((iv)) at 162.78 low. While above there, it favors higher in ((v)) to finish wave 3 of (3). It placed (i) of ((v)) at 174.30 high and expect short term pullback in (ii), which should remain above ((iv)) low to resume upside in (iii) of ((v)). It confirms the sequence above ((iii)) high. Short term, it should be remains supported in 3, 7 or 11 swings to see further upside.

TSLA 1-hour Elliott Wave chart

TSLA Elliott Wave video


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Average True Range – the ATR Indicator: improve your trading with volatility measure

2023.01.31 2023.01.31
Average True Range – the ATR Indicator: improve your trading with volatility measurelogo

The ATR (Average True Range) indicator is a useful tool that measures volatility levels. 

The ATR indicator meaning tells us how much the price has changed in a current period compared with previous periods. It is used in trend strategies to assess a trend reversal probability and determine the moment when the market starts a new trend. It also serves to place Stop Loss and Take Profit orders and is used for estimating the range’s width when trading results based on channel strategies. 

The technical indicator is included by default in many trading platforms and applied as an auxiliary indicator combined with Price Action and oscillators.

The article covers the following subjects:

What is ATR: average true range full definition

Technical analysis indicators can be divided into three groups:

The ATR Forex market indicator is often considered to be an oscillator as it helps us define new trend reversal points. If the indicator covers over 75% of its average distance in a fixed time period, there can be a reversal. Unlike oscillators, it hasn’t got the “0” and “100” limits that define overbought and oversold territories. Thus, the ATR indicator is a specific technical indicator that combines the three groups’ features.

The Average True Range was first introduced by J. Welles Wilder in 1978. 

J. Welles Wilder also developed such popular tools as Parabolic SAR and RSI. The technical indicator was first meant for futures markets, which are much more volatile than stock markets. Then it grew so popular that it was included in trading platforms (including trading Forex, trading CFDs, and working with other complex instruments) as a basic one. 

J. Welles Wilder created the ATR indicator for one purpose: determining market high and low volatility.

Average true range trading is rarely applied to manual strategies, but it is often used for forming trading advisors’ automatic risk management trading systems. This technical indicator doesn’t measure a trend’s strength and cannot forecast price movements. It only estimates market high and low volatility. 

That said, the average true range is the indispensable tool for setting profit target levels, stop placement orders, and determining the width of price channels in channel and range strategies (strategies used for trading retracements and breakouts).

The ATR indicator is NOT used for:

determining a price market direction;

searching for a divergence;

it can sometimes indicate reversal points;

it is used for measuring price ranges and the nature of their trend changes.


The indicator’s main signal is the following: when the indicator grows, an asset’s volatility grows. The classic error is to link the indicator’s growth to price growth. The ATR indicator doesn’t show the price’s direction either. When it grows, the price line may rise or fall. It’s the price volatility range that increases.

What is Average True Range?

ATR measures volatility over a certain period. It compares:

 Then it takes the greatest of those values and averages them out based on the arithmetic mean.

The indicator’s relatively low values can be read as follows:

The market is flat. The price moves in the same range, and the average difference between highs and lows doesn’t change. However, we cannot estimate the range’s width where the price fluctuates using the ATR indicator.

The market trend is slow. The price grows or falls, but the difference between neighboring candles isn’t significant.

The indicator’s leading signal is a sharp increase in its readings that indicates a rising difference in candlestick extremums. The candles’ bodies and shadows are growing, and the price’s angle of ascent relative to the horizontal axis becomes bigger. At the same time, the price range may remain the same. Volatility growth means that the price covers the same distance faster.

Example of using the average true range indicator:

There’s a small downtrend in the market; the ATR (Average True Range) value is small. 

Then, there’s a sharp high volatility splash: the price range is growing sharply over a short time period. The Average True Range is rising steeply. Next, a slow uptrend begins. Although the distance between the trend’s start and top is many times bigger than the volatile segment’s range, the ATR (Average True Range) is reducing because the trend has been developing over a certain time period.

ATR indicator formula

There are three formulas how to calculate ATR true range:

The difference between a current candle’s extremums (high and low). The current candle’s high less low.

Absolute value of the current Max (High) less the previous value of the close. |High — (Close-1)|.

Absolute value of the current period Min (Low) less the previous value of the close. |Low — (Close-1)|.


Then we take the greatest value of those and calculate the ATR indicator’s readings. Here’s the formula:

ATR = Moving Average (TR, m) 

where TR is the greatest value out of the three differences and m is an averaging period. Moving average is the arithmetic mean of a given set of values.

Average True Range calculation

Now let’s find out how to calculate the ATR true range value to better understand its work principle. I remind you that the Average True Range is the greatest value of the following: current period high minus current low; absolute value of current high minus previous close; absolute value of current low minus previous close. The indicator compares those three values for two neighboring candles. The period is the number of candles considered. 

For example, if the period’s value is 1, the ATR indicator will compute the difference of prices for the latest candle. It will compare its High/Low, and the difference between the candle’s High/Low and the previous close of the candle. So, with period “1”, two candles are considered. For example:

The difference between high and low: 1.2121 – 1.2117 = 0.0004, or four points for 4-digit quotes. That is the greatest value of the three possible remainders. 

The print screen shows that the value is identical to ATR true range calculation. “0.0004” means that the average true range is four points for one candle period. 

If we take period 2, the three latest candles will be considered. The two values for the ultimate and the penultimate candles are averaged: they are summed and divided by two, according to the arithmetic mean.

The longer the period, the more candles are considered, and the smoother the ATR line gets. However, remember that ATR reacts slower to price moves when the period gets longer.

How can volatility indicator help while trading?

This useful indicator identifies the moment when the price range starts enlarging sharply. This feature can be used for the following purposes:

To form short-term strategies. A sharp volatility surge is a perfect moment for scalping. You can check my article Forex scalping to learn more about this type of Forex market strategy.

To decide in your trading strategy in which direction a trade should be opened. If the Average True Range covered half its mean range, it’s probably too late to open a trade in the market direction of the trend, and you’d better wait for a reversal.

To determine price targets. Take Profit is placed at the volatility range limit or within the range. If the Average True Range is 60 points, Take Profit can be set at 45-50 points relative to the opening price.

To determine Stop Loss levels. Stop Loss is placed outside the price high and low volatility range and linked to the ATR correction multiplier. ATR correction multipliers are calculated separately for each specific asset.


What Does ATR Indicator Tell You?

The ATR indicator has got just one signal: it rises or falls. The higher the ATR line is, the more volatile the market is, and the faster the trend line moves from one range limit to the other.

In segment 1, the indicator is moving horizontally. It means the market is flat: the amplitude of price fluctuations and candlesticks’ size are small.

In segment 2, the ATR value is surging, and the indicator starts growing. It means volatility is increasing, and we should look for an entry point. As the ATR doesn’t indicate a price direction, we shall determine it ourselves. For example, draw support and resistance levels through the flat range’s extremums and open a trade in a breakout direction.

In segment 3, there remains high volatility, but the trend is changing direction. A trader’s task is to catch the price line reversal on time and reverse the trade when volatility is still high.

In segment 4, the indicator is returning to its lowest values in a flat range. It means volatility is declining; the pace of price changes is slowing down; the amplitude where the price fluctuates is decreasing; the candles’ bodies are becoming shorter than the candles in segments 2 and 3. That can indicate a flat market or a trend slowdown. In our case, we have a slow downtrend. It’s a signal for swing-traders and scalpers to exit the market.


Here’s how we can use the ATR’s signal about a rise in volatility:

 A new trend’s start is a signal to open a short-term trade to catch the fastest price movement in either direction over a short period. It’s one of the options for scalpers.

A sharp increase in the price movement amplitude is a signal to exit the market or increase stop placement orders’ value. Suppose we have a medium- or long-term trade, and the stop order value was calculated based on the maximum possible drawdown, according to our own risk management rules. We see that the volatility is growing sharply. We have two options: to close the trade earlier before the price reaches the stop level or top up our retail investor accounts, increase the stop value, and wait for a temporary drawdown to end. Without a robust trading strategy, there is a high risk of losing money rapidly.

This volatility indicator doesn’t point to overbought/oversold areas, so its readings are estimated compared to the readings over prior ATR periods by zooming out the chart. Volatility levels don’t depend on a price direction. The ATR line can be rising, while the price can be moving up or down.

Day trading ATR

Large time frames are usually used for preliminary analysis. The main time frame can be H1, and the time frame analyzed can be D1.

Example: let’s use ATR and see how it measures volatility for the USDCAD on the daily time frame.

With period 14, the value is 0.0077. It means that the price’s average true range is 77 points over the last 14 trading days. Switch to the H1 time frame and check how far the price moved since 00:00 up to this moment:

The daily range’s open price at 00:00 is 1.26799 (rounded to 1.2680); the current period price is 1.2661. There’s a powerful downtrend that other indicators can confirm too. The price fluctuates down by almost 20 points, with average volatility being 77 points. Theoretically, if the price line has not covered 50% of the average true range, we can open a trade in the trend direction. The market entry point for a short position is the current candle.

If the price has covered over 50% of the ATR, wait for a while. Think about opening a trade in the opposite direction of the trend if the price covers 70%-80% of the daily ATR. This method isn’t flawless, but it can be one of the options when determining market entry points and the price direction.

The ATR Indicator in MT4

The Average True Range indicator is one of the basic ones in MetaTrader 4 and MetaTrader 5. You can find it in the “Indicators/Oscillators” menu.

ATR true range settings for MT4

In the ATR settings Period is the main parameter. Using the same window, you can set Maximum and Minimum levels. That’s convenient for visually comparing previous periods’ volatility with a current period’s one. Memorizing values isn’t convenient: it’s easier to set the levels and check deviations from a current value by scrolling the chart. The chart will display only the time limits specified in the ATR settings.

You can fix the value of the level in the “Levels” tab, and it will be displayed as a horizontal line in the chart. For example, as the red line in the print screen below. 

One of the drawbacks of displaying the indicator in МТ4 is that only the current value is shown next to its name (the blue rectangle), and it won’t have significant change when you’re scrolling. You can put the cursor on a point and wait for a pop-up window or activate the “Data Window” (Ctrl+D). Both options aren’t convenient to me.

The Visualization tab shows how the indicator will be displayed on a selected time frame. For example, you’re analyzing the chart on several time frames, and you need ATR on the daily time frame. You tick D1, and the indicator will disappear when you switch to other time frames.

There are various modifications of the indicator on the Internet. You can download ATR Ratio on the MQL5 site (Short-term ATR / Long-term ATR ratio).

The template can be added to the platform. Please let me know if you want to learn more about those modifications and work strategies based on them.

ATR settings on LiteFinance’s online platform

How you can find how to manage the ATR settings on LiteFinance’s platform:

Go to “For Beginners/Open a demo account” in the homepage’s upper menu. You will be automatically redirected to a free demo account on LiteFinance’s online platform. Registration isn’t necessary.

Click “Trade” in the left menu. Choose your trading financial instruments. Let’s say the EURUSD pair in the “Currencies” tab.

On the price chart that appears, click on “Indicators” and select “Average True Range.”

ATR settings on LiteFinance’s online platform

There are a few ATR settings:

1. Depth (period)

The default value is 14, which means the indicator uses the last 14 candlesticks. For short periods up to M15, it is recommended to increase that period. For time frames longer than H4 – decrease that period. For example, many traders prefer period 7 for the D1 time frame.

An asset’s peculiarities should also be considered: some pairs are more volatile than others. So, it would be wise to shorten the period for low values of assets’ volatility to increase the indicator’s sensitivity to price changes.

2. Smoothing

It’s about the type of MA that the indicators are based on. There are four options. This parameter doesn’t influence the ATR line’s plotting significantly, but the value can vary, and that can be a decisive moment for high-precision strategies.

3. Accuracy

The parameter varies from 0 to 8 and sets the number of digits after the decimal point. 

You can change the line color in the “Style” tab. 

In contrast to MT4, you can see the indicator’s value by placing a mouse pointer to it.

How to use ATR indicator

Average True range is most often used in the following cases:

To determine Stop Loss levels. Volatility levels outline the range of price movements. The limits of that range can be a reference point.

To determine flat periods. If the ATR value is low when compared with average volatility, the market is flat.

To identify the end of a trend. The farther the price line goes beyond the ATR limits, the likelier it is to stop.

Placing Stop Loss orders

Stop orders are usually placed in the area of local extremums with a slight indent. The question is how to correctly identify local extremums and not let price noise trigger stop orders.

To place stop orders using ATR, we need to do the following:

Draw support and resistance levels through the most evident extremums on a short time frame (М5-М15).

Add/subtract 2*ATR to/from the price value of the candle’s ultimate extremum. The value you get is a Stop Loss level. The multiplier “2” should be adjusted to each specific pair. At least 1.5 ATR is recommended. The best ATR Stop Loss multiplier for time frames starting from H1 is “3”.

There’s a different method: place a stop order at the level when opening a trade. Subtract or add a few points from that value for filtering. To place Take Profit, switch to a bigger time frame and check the financial instruments’ level there.

This method works the best on short time frames with price noise — the price line’s chaotic, unpredictable price movements in either direction. Using the indicator allows us to place stop orders at a safe level, providing for price noise.


During a downtrend, draw a resistance level to open a trade after its breakout, confirmed by the pattern. Open a long position on a pullback. Minimum price — 1.19588, ATR — 0.0005 or five points. Multiply 0.0005 by two and subtract the value from the minimum price. You’ll get the Stop Loss level of 1.19488. As the print screen shows, the price line didn’t get to that level. It tested the level of 1.19516 and then reversed upwards.

Flat filter

You earn from a trending currency pair with medium daily volatility of 80 points. I got this number using a volatility calculator. If current period volatility is less than 50% of that range, the market can be considered flat. So, if the value is less than 40 points, we don’t search for entry points using trend strategies as any direction of quotes will hardly last for a long time.

It’s hard to say if it’s reasonable to follow that scheme. First, the value of 50% is conventional and should be readjusted to each particular pair. Second, the market can be trending on smaller time frames. 

The instrument’s drawbacks are lags, which is true of all moving averages. The longer the period, the less sensitive the instrument is to current price changes. For example, if you set the period at 50, the indicator will consider 50 last candlesticks. If the price changes sharply on the two or three last candles, such trend changes will be absorbed by the previous candles’ values. On the other hand, a short time frame can produce a lot of false trading signals. So, all the minuses of moving averages are typical here too.


The EURUSD’s average volatility over the past performance during the week was 44.25 points.

The ATR current value on 4-digit quotes was 61 points on the daily chart. As the current volatility is higher than average, the market isn’t flat, and the current trend is a bit stronger than the weekly one.

Determining potential trend reversal points

The bigger the indicator wave’s amplitude is relative to its previous values, the likelier the price line is to reverse.


A relatively low ATR value couldn’t say if there was a trend on the daily chart. There was an uptrend, but its pace was so slow that the Average True Range couldn’t identify it.

The indicator’s steep growth indicates that market volatility is rising: the price’s angle of ascent is increasing, and the price is changing faster. The trader only needs to predict the trend’s direction. 

ATR reaching the maximum and reversing means that volatility has started to fall. Note that the trend changed its direction while the indicator line was growing. Let me remind you that the Average True Range doesn’t indicate price directions; it only shows a relative price change speed. The indicator’s return to its current lows means that the price change speed is declining: the market is becoming flat or trending slower.

There’s another way to identify pivot points. The average true range value is compared with the distance that the price has covered from the beginning of a time frame to the present moment. A shorter time frame is used for comparison.

Example. Let’s take as 100% the H1 ATR value, which shows a price movement’s average true range over the past hour. Then switch to the one-minute time frame and find where the current H1 time frame begins. Estimate the price distance covered up to the present moment.

If the price line went farther than 70%, a reversal is highly likely to happen. Think about opening an opposite position.

 If the price line covered less than 30% of the distance, think about opening a trade in the trend direction.

If the distance varies from 30% to 70% of the range, take your time.

Those values are just a reference point. They are specific to each particular asset.

ATR trading strategies

Trading on several time frames using levels and ATR. Most strategies have already been described above. I’ll show you how to use them in practice.

Step 1. Daily time frame analysis

Open the GBPUSD’s daily chart and check the trend.

The chart shows a strong, steady trend that started after a dramatic drawdown. Note a sharp ATR surge during the downtrend: one could profit from short positions there. A smooth uptrend continues; there are several consecutive growing candles with small bodies. The ATR indicates there’s no strong volatility. That means the price is expected to continue rising smoothly. The ATR value is 92 points.

Step 2. Short-term time frame analysis

Then switch to the M15 chart and check how many points the price has covered since the daily opening.

The opening price was 1.38988 at 00:00. By the morning, the price gained almost 55 points and then came back. ATR indicates high volatility. As the daily range is 92 points and the price isn’t far from the start, we can presume that the uptrend will continue.

Step 3. Opening of a trade

Let’s sum up: we decided to open a long position because:

There’s a slow uptrend with low volatility on the daily time frame.

The M15 time frame is showing a resistance level from which the price has just pulled back upwards.

The price has covered nearly 50% of its daily volatility and partly corrected back to the daily range’s start point.

So, I open a trade at 1.39236 (almost 25% of the daily range equal to 92 points). Stop Loss: current ATR*2, which equals 14 points. A multiplier of 3 would probably be better: Stop Loss would be located a bit below the opening price of 1.38988. Take Profit: 75% of daily ATR.

The volume of a position should be determined individually and depends on your goals and deposit.

Close the trade based on Take Profit or when a clear reversal pattern appears. I don’t think it will appear before the daily ATR reaches 50%, though. The profit target is 5 USD.

Step 4. Closing a trade

4.1. Conservative scenario

Everyone has their own profit targets, but I’d recommend that beginner traders shouldn’t wait for Take Profit to trigger and should fix current profit targets at the first reversal.

If you see that the price cannot decide its direction during a high volatility period, like in this market conditions, close the trade. Closing price: 1.39385. Profits in 2.5 hours: around 15 points minus spreads.

4.2. Aggressive scenario

The target is to make the most profits based on the ATR theory. I’m not in a hurry to close a trade, and I hold it. As a result, it closed at Stop Loss at minus 1.51 USD. The market analysis revealed a mistake. The market volatility is still high, but there was a clear trend shift. The arrow in the print screen below marks the opening point.

The daily candlestick is downward. So, I open a counter trade using the same principle: the opening price at 00:00 (1.38988) marks the beginning of the volatility range, but the trend is downward now. The volume can be doubled.

It took me 30 minutes to claw back the loss from the previous trade and earn 0.5 USD. I fixed the profit from the second trade for psychological reasons: to cover the previous loss.

Key points:

The ATR indicator shows current volatility shifts. However, the examples proved that the price could change its direction within a few hours. That can be used in Swing trading strategies.

To calculate Stop Loss for a short time frame, we’d better use multipliers equal to or less than 2. I’m open to further discussions regarding the issue, though.

There are two market exit strategies. The first one suggests exiting at the first trend reversal. The other one implies using Take Profit calculated based on ATR. If a trade hasn’t closed by the end of the day, close it manually. If a trade is closed at Stop Loss, try to open a counter position.

You can use hedging or Trailing Stop.

ATR Trailing Stop Loss

Trailing Stop Loss is a Stop Loss order that follows the price in the direction of a trade and stays at the taken level if the price reverses.

Volatility is measured only by the price range over a fixed time frame. The price can move in any direction. If we open a trade and place a regular Stop Loss order when the price went outside a flat range, we can have the following scenario: the price reaches fast the opposite limit of the volatility range and gets back. Here’s an example in the print screen below.

Average True Range starts growing, and we can open a long position in point 1. If a trader is eyeing the chart all the time, he/she will close the trade based on patterns in point 2. If he/she misses that moment, he/she will lose profits and make losses in point 3. The price will have gone through the entire volatility range and backward within a few hours. 

Using ATR Trailing Stop allows us to fix at least some parts of profit and avoid closing a trade at loss during high volatility. Theoretically, the Trailing stop’s value is ATR*k, where “k” is a volatility multiplier set manually. Most often, it’s “2”, “2.5” or “3”: the higher the time frame, the bigger the multiplier.

The same example: a long position is opened at 1.26776 in point 1 and secured with Trailing Stop set at 2*0.0006, i.e., 12 points, which equals the ATR value registered at the trade’s opening. If the trade is secured with Trailing Stop, it will be automatically closed in point 2. If we deduct spreads, the profit will be around 15-17 points on 4-digit quotes in two hours. Without Trailing Stop, the trade would have been closed at 12-point loss plus spreads.

How to set Trailing Stop on LiteFinance’s platform:

Set the position sizing of a trade and open it in one click.

Open the “Portfolio” menu in the lower part of your platform and click “Edit”.

Set Trailing Stop in the window that opens.

ATR stock trading

The instrument’s application to the stock market is the same. Average True Range estimates trading activity and most traders’ interest in a stock. If the indicator’s value is growing, volatility and trade volumes are growing too. If the value is low, the market is flat. In addition to ATR, you can use the volume indicator or the depth of market (DOM) in MT5 to check powerful support and resistance levels.

The indicator is even more useful when financial reports, press releases, or other stats are published. It helps us to see:

Market reaction – how fast and violently the market reacts to the news.

Market volatility levels concerning specific newsworthy occurrences; what type of news provokes a stronger market reaction.

Volatility degree: how long a high volatility period lasts after statistics are released.

Correlation: which releases are interrelated? For example, will Apple’s financial reports affect other technological companies’ quotes?

Another important aid will be the Economic calendar and financial calendar. Have a try and use ATR on the Tesla (TSLA) chart, for example.

Downsides of ATR

The Average True Range has got some downsides too:

Limited area of application. It doesn’t show asset’s price directions or provide forecasts. It only estimates general volatility levels compared with previous periods.

Lags. Specific average true range formula. Volatility can start growing, but the indicator’s value will still be low. Lagging can last across 1-2 candlesticks.

Though ATR belongs to the oscillators group, it’s best applied in combination with Stochastic, MACD, and other oscillators. Also, short periods will work better: the period of 12-14 is optimum on the H1 time frame.

Key points

Volatility indicators are necessary for professional trading. They aren’t informative enough for beginner traders to appreciate them more than other tools. Nevertheless, it’s worth mentioning as some may need them for developing their trading strategies. 

Would you like to download the ATR indicator free? Don’t hustle. It’s a basic indicator on MT4 and MT5 platforms, and you can get used to it on demo retail investor accounts. If ATR isn’t there for some reason, you can reinstall the platform or copy the setup file from the MQL/Indicators folder from the platform installed on another computer. You can also find ATR on LiteFinance’s platform integrated into the Client Area. You don’t need to install it.

I hope this article has been useful for you. If you’ve got any questions left, ask them in the comments section. Good luck in trading!

P.S. Did you like my article? Share it in social networks: it will be the best “thank you” 🙂

Ask me questions and comment below. I’ll be glad to answer your questions and give necessary explanations.

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.

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