From all of our examples we now know the following information for the currency pair EUR/USD
. UdM = ~ 200 pips AdR = 112 pips UwM = 425 pips AwR = 244 pips UmM = 775
AmR = 496
Please remember that the above figures are correct at the time of this writing
and may not be at all accurate by the time you will be reading this. Please
repeat the procedures to find all of these numbers for EUR/USD yourself in
addition to any other currency pair of interest to you.
Here are a few more words about finding the Usual Maximums. This isn’t an
exact figure but really just an eyeball – if you really want to you could take
the average of the say the 10 or 15 highest peaks (this would generally yield a
higher number than the one you’d “eyeball”), but ultimately an exact number
won’t be any more specifically useful than an approximate one. What you are
looking for is an area that appears to be the maximum ceiling for the average,
though recognizing that there have been a few times that this level has been
penetrated, and likely will get penetrated in the future. I guess I should
instruct you to do it the “proper” way (taking an average of the top dozen
peaks), and I’m sure that it would be somewhat more useful information, but
telling you to do this would be rather hypocritical of me since I personally
never do it.
Ok, so what are all of these ATR figures for? The answer is simple. The
primary purpose of knowing the ATR of the candles you are observing (i.e.
knowing the Daily average if looking at the Daily candles) is to assess the risk
and likelihood of the trades you engage to reach the success target. Later in
this eBook you will learn a variety of trading techniques, and for example,
some of them are based on the amplitudes (how tall) of the day candles. If
your stop order is placed within the range of the Daily average (AdR) then
there is a good possibility that you may get stopped out by simple market
fluctuations. Knowing the UdM, and seeing how far your stop order is in
respect to the UdM then you will know the likelihood of a rogue large day of
stopping you out (but this will happen less often). Conversely, if you are
doing a “Roulette” trade then you can similarly predict how many days your
trade might last until you either get stopped out or limit exit for
profit. Knowing the Usual Maximums and Average Range of the Weekly and
Monthly perspectives offers you similar foresight although you are less likely
to engage in trades using such large stops, thus those are mostly used to help
you to determine possible trade duration.
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