Table of Contents
1. Introduction
The ATR (Average True Range) indicator measures market volatility and generates trading signals based on volatility breakouts and contractions. This guide provides optimized configurations for different trading strategies and timeframes.
What is ATR?
- ATR measures the average price range over a specified period
- Higher ATR = Higher volatility
- Lower ATR = Lower volatility (consolidation)
2. ATR Signal Types
1. ATR Breakout Signals (High Volatility)
Generated when volatility exceeds the average by a specified multiplier, indicating potential strong moves.
- ATR_BREAKOUT_BUY: High volatility with upward momentum
- ATR_BREAKOUT_SELL: High volatility with downward momentum
- PUMP: Extreme upward volatility spike
- CRASH: Extreme downward volatility spike
2. ATR Contraction Signals (Low Volatility)
Generated when volatility drops below the average, indicating consolidation and potential breakout preparation.
- BUY: Low volatility consolidation with bullish bias
- SELL: Low volatility consolidation with bearish bias
3. Configuration Parameters
Core ATR Settings
# Signal Enable/Disable
enable_atr_breakout_signal: true # High volatility signals
enable_atr_contraction_signal: false # Low volatility signals
# ATR Multipliers
atr_high_volatility_multiplier: 2.0 # Breakout threshold (2x average)
atr_low_volatility_multiplier: 0.5 # Contraction threshold (0.5x average)
# ATR Calculation
atr_lookback_period: 14 # Periods for ATR average
atr_calculation_period: 14 # Base ATR calculation period
Signal Actions
supported_volatility_action:
- "BUY" # Low volatility buy signal
- "SELL" # Low volatility sell signal
- "PUMP" # Extreme upward volatility
- "CRASH" # Extreme downward volatility
supported_volatility_action_broadcast:
- "BUY"
- "SELL"
- "PUMP"
- "CRASH"
- "ATR_BREAKOUT_SELL" # High volatility sell
- "ATR_BREAKOUT_BUY" # High volatility buy
4. Trading Strategy Configurations
🚀 SCALP Trading (Quick In/Out - Minutes)
Goal: Capture small, rapid price movements with high sensitivity
# Scalp Configuration
enable_atr_breakout_signal: true
enable_atr_contraction_signal: true
atr_high_volatility_multiplier: 1.5 # Lower threshold for faster signals
atr_low_volatility_multiplier: 0.6 # Catch early contractions
atr_lookback_period: 7 # Shorter lookback for responsiveness
atr_calculation_period: 7 # Faster ATR calculation
# Best Kline Intervals: 1m, 3m, 5m
# Priority Signals: ATR_BREAKOUT_BUY, ATR_BREAKOUT_SELL, PUMP, CRASH
Characteristics:
- Very sensitive to volatility changes
- Multiple signals per session
- Requires constant monitoring
- Higher false signal risk
📊 DAY Trading (Intraday - Hours)
Goal: Capture intraday trends with balanced sensitivity
# Day Trading Configuration
enable_atr_breakout_signal: true
enable_atr_contraction_signal: true
atr_high_volatility_multiplier: 2.0 # Standard threshold
atr_low_volatility_multiplier: 0.5 # Standard contraction
atr_lookback_period: 14 # Standard lookback
atr_calculation_period: 14 # Standard ATR
# Best Kline Intervals: 5m, 15m, 30m, 1h
# Priority Signals: All signals balanced
Characteristics:
- Balanced signal frequency
- Good for 9 AM - 4 PM trading sessions
- Filters out minor noise
- Suitable for most day traders
📈 SWING Trading (Days to Weeks)
Goal: Capture multi-day trends with reduced noise
# Swing Trading Configuration
enable_atr_breakout_signal: true
enable_atr_contraction_signal: false # Focus on breakouts only
atr_high_volatility_multiplier: 2.5 # Higher threshold for quality
atr_low_volatility_multiplier: 0.4 # Not typically used
atr_lookback_period: 20 # Longer lookback for stability
atr_calculation_period: 20 # Smoother ATR
# Best Kline Intervals: 1h, 2h, 6h, 12h
# Priority Signals: ATR_BREAKOUT_BUY, ATR_BREAKOUT_SELL
Characteristics:
- Fewer but higher quality signals
- 3-10 day holding periods
- Less sensitive to intraday noise
- Good for part-time traders
🎯 LONG-TERM Trading (Weeks to Months)
Goal: Identify major trend changes and position entries
# Long-Term Configuration
enable_atr_breakout_signal: true
enable_atr_contraction_signal: false
atr_high_volatility_multiplier: 3.0 # Very selective signals
atr_low_volatility_multiplier: 0.3 # Optional for accumulation zones
atr_lookback_period: 30 # Long-term average
atr_calculation_period: 30 # Very smooth ATR
# Best Kline Intervals: 6h, 12h, 1d
# Priority Signals: PUMP, CRASH, ATR_BREAKOUT_BUY/SELL
Characteristics:
- Rare, high-conviction signals
- Multi-week holding periods
- Minimal monitoring required
- Captures major market moves
5. Kline Interval Settings
Optimal Interval Selection by Strategy
| Kline Interval | Best For | Signal Frequency | Noise Level |
|---|---|---|---|
| 1m | Ultra-scalp | Very High | Very High |
| 3m | Scalp | High | High |
| 5m | Scalp/Day | High | Medium-High |
| 15m | Day Trading | Medium | Medium |
| 30m | Day Trading | Medium | Medium-Low |
| 1h | Day/Swing | Medium-Low | Low |
| 2h | Swing | Low | Low |
| 6h | Swing/Long | Low | Very Low |
| 12h | Long-Term | Very Low | Very Low |
| 1d | Long-Term | Very Low | Minimal |
Multi-Timeframe Analysis Recommendations
- Scalpers: Use 1m for execution + 5m for trend confirmation
- Day Traders: Use 15m for signals + 1h for trend direction
- Swing Traders: Use 1h for signals + 6h for trend context
- Long-Term: Use 1d for signals + weekly charts for macro trends
6. Signal Actions & Broadcasting
Signal Priority Levels
Critical Signals (Always Broadcast)
- PUMP: Extreme upward volatility (3.0x+ ATR)
- CRASH: Extreme downward volatility (3.0x+ ATR)
High Priority Signals
- ATR_BREAKOUT_BUY: High volatility buy signal
- ATR_BREAKOUT_SELL: High volatility sell signal
Standard Signals
- BUY: Low volatility consolidation buy
- SELL: Low volatility consolidation sell
Broadcasting Configuration
# Enable all relevant signals for your strategy
supported_volatility_action_broadcast:
- "PUMP" # Always broadcast - extreme events
- "CRASH" # Always broadcast - extreme events
- "ATR_BREAKOUT_BUY" # Breakout signals
- "ATR_BREAKOUT_SELL" # Breakout signals
- "BUY" # Optional for scalpers/day traders
- "SELL" # Optional for scalpers/day traders
Notification Channels: Discord, Telegram, WhatsApp
7. Best Practices
1. Configuration Guidelines
Starting Configuration (Conservative):
enable_atr_breakout_signal: true
enable_atr_contraction_signal: false
atr_high_volatility_multiplier: 2.5
atr_lookback_period: 14
Aggressive Configuration (Experienced Traders):
enable_atr_breakout_signal: true
enable_atr_contraction_signal: true
atr_high_volatility_multiplier: 1.8
atr_low_volatility_multiplier: 0.6
atr_lookback_period: 10
2. Signal Interpretation
ATR Breakout Signals:
- ✅ Confirm with volume increase
- ✅ Check trend direction on higher timeframe
- ✅ Use stop-losses below/above recent swing points
- ⚠️ Avoid during news events (unless that's your strategy)
ATR Contraction Signals:
- ✅ Wait for directional confirmation
- ✅ Use for pre-positioning before breakouts
- ✅ Tighten stop-losses due to low volatility
- ⚠️ Can produce false signals in ranging markets
3. Risk Management by Signal Type
| Signal Type | Position Size | Stop-Loss | Take-Profit |
|---|---|---|---|
| PUMP/CRASH | 25-50% of normal | Tight (1.0x ATR) | Quick (1.5x ATR) |
| ATR Breakout | 75-100% | Standard (1.5x ATR) | 2.0-3.0x ATR |
| BUY/SELL (Contraction) | 50-75% | Tight (1.0x ATR) | 2.0x ATR |
4. Common Pitfalls to Avoid
❌ Don't:
- Use scalp settings on 1d charts (too many false signals)
- Ignore higher timeframe trends
- Chase PUMP/CRASH signals without confirmation
- Use same settings across all assets (volatility varies)
- Trade without stop-losses on breakout signals
✅ Do:
- Backtest settings on your specific assets
- Combine with other indicators (RSI, MACD, Volume)
- Adjust multipliers based on asset volatility
- Keep a trading journal to track signal accuracy
- Use smaller position sizes during learning phase
5. Asset-Specific Adjustments
- Cryptocurrencies (High Volatility):
• Increase multipliers by 0.3-0.5
• Use longer lookback periods (20-30) - Forex Major Pairs (Medium Volatility):
• Standard multipliers work well
• 14-period lookback optimal - Stocks (Variable Volatility):
• Decrease multipliers for large-cap (1.8-2.2)
• Increase multipliers for small-cap (2.5-3.5)
Quick Reference Table
Strategy × Interval Optimization Matrix
| Strategy | Intervals | ATR Mult (High) | ATR Mult (Low) | Lookback | Breakout | Contraction |
|---|---|---|---|---|---|---|
| Scalp | 1m, 3m, 5m | 1.5 | 0.6 | 7 | ✅ | ✅ |
| Day | 5m, 15m, 30m, 1h | 2.0 | 0.5 | 14 | ✅ | ✅ |
| Swing | 1h, 2h, 6h, 12h | 2.5 | 0.4 | 20 | ✅ | ❌ |
| Long | 6h, 12h, 1d | 3.0 | 0.3 | 30 | ✅ | ❌ |
Example Configuration Files
Complete Scalp Configuration
# SCALP STRATEGY - 1m/3m/5m
enable_atr_breakout_signal: true
enable_atr_contraction_signal: true
atr_high_volatility_multiplier: 1.5
atr_low_volatility_multiplier: 0.6
atr_lookback_period: 7
atr_calculation_period: 7
supported_volatility_action:
- "BUY"
- "SELL"
- "PUMP"
- "CRASH"
supported_volatility_action_broadcast:
- "BUY"
- "SELL"
- "PUMP"
- "CRASH"
- "ATR_BREAKOUT_SELL"
- "ATR_BREAKOUT_BUY"
Complete Swing Configuration
# SWING STRATEGY - 1h/2h/6h/12h
enable_atr_breakout_signal: true
enable_atr_contraction_signal: false
atr_high_volatility_multiplier: 2.5
atr_low_volatility_multiplier: 0.4
atr_lookback_period: 20
atr_calculation_period: 20
supported_volatility_action:
- "PUMP"
- "CRASH"
supported_volatility_action_broadcast:
- "PUMP"
- "CRASH"
- "ATR_BREAKOUT_SELL"
- "ATR_BREAKOUT_BUY"
Support & Further Reading
Key Concepts:
- ATR measures volatility, not direction
- Combine with trend indicators for best results
- Higher timeframes = more reliable signals
- Always backtest before live trading
Recommended Additional Indicators:
- RSI (momentum confirmation)
- MACD (trend confirmation)
- Volume (signal validation)
- Support/Resistance levels
This guide provides a framework for ATR-based trading signals. Always conduct thorough backtesting and risk assessment before implementing any strategy with real capital.