ATR Multiple: Gauge for Price Extensions and Market Risk

ATR% represents the implied volatility range of a stock from open to close, calculated using the past 14 days of data (as I use ATR-14 by default).

ATR multiple builds on ATR% by quantifying extension levels as multiples from the 50-MA, serving as a measurable gauge of price extensions. Each security has a historical ATR multiple at which it tends to retrace, though I don’t interpret this as a "short" signal. Instead, I advocate using it as a signal to sell further into strength or avoid initiating new/add entries.

I also utilize ATR multiples from the 50-MA as a measure for broad market indices, assessing technical headwinds versus tailwinds to determine whether to take on risk or hold positions and wait.

Some swing traders profit from $100B+ market cap stocks using a 20-MA sell rule, while others succeed with $100M+ stocks and a 10-MA sell rule. The key is to specialize and align your sell rule with the typical momentum behavior of the assets you trade. When it aligns, it will deliver results.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

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