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Average True Range strategy

Writer's picture: ProRealAlgosProRealAlgos

This strategy is utilizing one of my favorite technical analysis indicators, the Average True Range or ATR for short. ATR measures volatility, taking into account any gaps in the price movement.


It's a great tool to use for both entries and exits. In this simple strategy we're running it together with MA5 on the daily timeframe of SP500 with great results, and by only reversing the entry condition as the exit condition.


Entry condition

  1. Close < (MA5 - ATR10)


Exit condition

  1. Close > (MA5 + ATR10)


Here's the equity chart from Aug 1990 until today

It's a smooth equity curve with long periods with no major drawdowns


Statistics (Aug 1990 - today)

  • 78.03% winrate

  • 264 trades

  • 5006 points gained

  • 795 points max drawdown

  • 40.29% time in market

  • 2.53 Gain/Loss Ratio

  • Positive returns in 33 of 35 years


I think it's worth nothing that you're getting similar returns with this strategy as a buy & hold strategy, and that is with only 40.29% time in market. Combine this swing strategy with some other strategies to leverage your capital when the strategy is not in market, and you will overachieve the index without doubt.


The ProRealTimeâ„¢ code

DEFPARAM CumulateOrders = False

IF Close < Average[5](Close) - AverageTrueRange[10]  THEN
	BUY 1 CONTRACT AT MARKET
ENDIF

IF Close > Average[5](Close) + AverageTrueRange[10] THEN
	SELL 1 CONTRACT AT MARKET
ENDIF

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