Pine Script [OUTDATED V4] Tutorial | Lesson 7 | How To Use ATR Trailing Stop Loss

hey friends welcome back to another plane script coding lesson my name is matthew from zen and the art of trading and today i'm gonna be showing you how to use the ATR indicator in your scripts so in the previous lesson i showed you how to use the RSI indicator to create overbought and oversold signals in this lesson I'm going to show you how to use the ATR indicator to create a trailing stop so we're just going to draw onto the chart our trailing long position stop and a short position stop I'm going to do it this way because it's just a lot more simple to demonstrate the logistics behind using this indicator in your scripts but in future lessons I'll come back to this lesson 6 script this RSI script and I'll show you how to plot your stop-loss and target placement so say you wanted to go along here after the RSI went oversold then we got a bullish engulfing candle so you want to have a 180 our stop loss and a 180 our target then you can actually plot these values directly to your chart using pine script but today's lesson we're not going to cover that I'm just going to keep it simple we're gonna delete the script I'm gonna start a new blank script and I'm going to call it lesson you guessed it seven keeping it really simple for you guys here alright so the first thing we need to do is set our overlay to true now overly to true if you if you set this to false then if I save this and add it to my chart it'll draws an oscillator box so now we're plotting the price we have a line chart that is separate to our main chart so that's useful when you're creating oscillator indicators basically like the RSI stochastics when you're working with those sorts of those styles of indicators but today's script we're going to be drawing directly to the chart so that I can visually represent the information I'm going to show you so if I click Save there delete this script and add this back to my chart we now have the closing price plotted directly to the chart so let's get straight into this one so first thing we're going to do is we're going to get inputs from the user because it's always useful to be able to adjust these values on the fly the first thing we're gonna want to get is the ATR length by default this is usually 40 a 14 period ATR so we'll leave that as the default setting but it's also great even creating scripts especially to release to the public it's always considered good etiquette to include as many options as you can for customizing the scripts so I'm gonna get in get you guys into that habit early on and so we're gonna call this 180 our length and we're going to have a type of input integer it's gonna be a whole number we're gonna have a default value of 14 and a min value of 1 might as well this isn't necessary but the ATR length can't be calculated beyond a 0 or negative value so might as well get into a good habit of using this min Val function as well or feature the second input we're going to use is a boolean and we're gonna call this one use structure so I'll explain what this does later first of all let's just code it in so we're gonna say use structure I like to put question marks on the end of my boolean inputs just out of habit you don't have to do that the default value is going to be true in this case this is going to be used for detecting swing lows and swing highs to trial stop-loss the alternative method is to just have a 180 R or whatever multiplier you want of the a TR from the closing price so that'll make more sense later I'll explain that later on so we're gonna have two more inputs the next one is look back this is for the structure look back so title is how far to look back for high-lows and we're gonna make this a integer as well because it's gonna be a whole number and we're gonna set a default value of 7 so we're gonna look back seven bars for swing high and swing lows the min value be 1 as well on this input and then we're going to create one more variable called the ATR stop multiplier and I'll also explain what this does later this will make more sense later I just like to get these inputs out of the way early so we're gonna say ATR times question mark and this one is going to be an input dot float it's gonna be a floating point variable and if I just quickly add the ATR indicator on to my chart you'll see why that is see if I hover my candle my cursor mouse cursor over any of these bars the it'll show you down here in the left-hand corner of this indicator this oscillator box it will show the ATR value and that's obviously a floating-point number it's not a whole number it's got a decimal point zero point zero zero zero one six is one point six pips I'm on the 1-minute chart here if you're wondering why the ATR is so low I just figured that the one-minute chart would be the best time frame to demonstrate this technique on but this script will obviously work on all time frames so for this one we're going to have a default value of one point zero so we're going to have a default value of a one ATR stop multiplier so whatever the ATR indicator is giving us that will be our stop loss so say above this swing high will have a one ATR stop above this swing high we don't need to set a minimum value for this but might as well while we're here and I'll set it to zero point one if you're going lower than a zero point one ATR multiplier then you might as well not use this at all so that's all of our inputs we're going to be using today so now the next step is to calculate the data that we're going to be plotting to the chart so we'll call this comment calculate data just for our own reference and the first thing we need to do is get the current ATR value so we're going to call this variable ATR just keep it simple I like my scripts to be as simple as possible we'll call it ATR and we'll use the ATR function to get the current ATR value with our specified ATR length so this by default is 14 that's the that's what this see 14 RMA is giving us a default AGI reading and so we'll this line of code here so these values will be identical and I'll show you that right now actually if we click the save and we look up here that at the top left of the chart you can see that those numbers are identical so we're plotting a 0.2 for now fit ATR it's the same on both indicators so that's good let's move on to now calculate our stop losses so our long trailing stop is going to be plotted below price and that's for long position so if we were to have gone long here then it will plot where our trailing stop should be which will be 180 our below the most recent swing low so let's type that in long stop is set to and then this is going to get a little bit complicated here but it's not that crazy it's just gonna be a bit confusing to read so I'll explain it as I go but we're going to use the conditional operator again and this just saves space in our code and we can put all of this if-then statement into one line of code so we're going to say use structure question mark if we're using structure if we've ticked YES on this you structure input then we want to calculate the stop loss based on the lowest low over our look-back period otherwise if we're not using structure then we just want to use the closing price so this line of code here now does two things if we have this ticked as true use structure is true then we're going to search back seven candles that's the default value of our look-back variable we're gonna look back seven bars and we're going to find the lowest low in those seven bars so in this case that would be this low in here and then we will calculate the stop loss as one eighty are below this swing low so the way we do that is we're gonna - because our stop loss is below price we're gonna - this lowest low or this closing price by the ATR value which is here but we're not just going to do that because otherwise we can only use a standard 180 our trailing stop what if your user wants to have a two ATR or three ATO or half ATR trailing stop well the way that you achieve that is by timesing this value this calculation by our ATR stop multiplier so if I type that in there we now have our trailing long stop so if I just quickly I'll just demonstrate what this looks like so we'll type in plot our long stop the color is going to be color dark green it's going we're going to use a little bit of style here we're gonna say style equals plot style underscore line break line be are the short for line break then we're going to call it we're gonna title it long trailing stop we're going to set the transparency to zero we don't want any transparency on this if I hit save here you can see we are now plotting our trailing stop and it's plotting 180 are below the lowest candle or the lowest low of the past seven candles so say you wanted to use a standard trend following technique and you wanted to trail your stop-loss below the low of the pullback preceding the breakout the most recent breakup so in this case it would look like this we have a swing high here a couple of candles pullback then we break in close above the swing high on this candle here if you were to hold your mouse cursor over this candle look back seven bars the ATR indicator over this candle here this trailing stop will be plotting the lowest low below these seven bars so on this one-minute chart you might want to make these look-back period a little bit shorter than seven bars because you can see here that that's that would put you on this bar here which is lower than the swing low of the pullback but let's just say we hover our mouse over this here this will give us the trailing stop value so say you went long down here on this bullish engulfing candle and you had a 180 ah stop below this entry which would put you around here somewhere and say that when this breakout happened you wanted to trail your stop-loss up a little bit you would move your stop-loss you'd hover your mouse over here look for the value which up in the top left here is zero point six zero three eight eight so you would help bring your your stop-loss up to this green line here and so that's how this indicator would work in practical terms but that's not important for the demonstration so let's just continue onwards now and we'll draw the short trailing stop so the short stop is going to be set to use structure question mark are we using structure if we are we want to use the highest high over the pier over the look-back period as our reference price otherwise we won't just want to use the close and because this is a trailing stop that is above price action we've won the plus we want to add to this value so we're going to add the current ATR times our ATR stop multiplier so by default this is set to one so this is just one ATR but as you can see if you want to change that to say - ATR that will widen your stop-loss or a zero point five ATR which is why we set this to a float not a whole number we can set it even tighter it's up to you that's a matter of preference so now we've got that we can now plot I'm just going to copy this line of code I'm going to plot our shortstop and the shortstop's going to be colored red everything else can stay the same we'll change this to say short trailing stop click Save and it will now plot our short trailing stop above price so if you had word to have gone short up here on this little double top up here maybe you had a 180 our stop above the high then as price went into your favor you were just simply every time we had a breaking close below a swing low so we had a break and close below the swing low here you'd hover your mouse over that candle and then whatever value you get up here is where you would put your stop loss and so that's a practical way of using this particular indicator this script and so I'll do one last thing before we finish this lesson and that's we're going to keep plotting this ATR indicator but we don't want to actually plot the value if I scroll this right down right down you'll see that it's actually plotting our ATR to the chart we don't want that because it's gonna on some instruments that may draw over price action and we don't we don't want that so what we can do is use the transparency function so what we'll do here is I'll set the color you can set the color to whatever you want I'll leave it as blue in this case I will also title it so that our users of our script can adjust this color and transparency as they wish and we'll set the transparency in this case to a hundred we wanted a hundred percent transparent here we have zero percent transparent because we want it to be drawn to the chart clearly here we don't want to drawn at all if I type that in hit save and now if I scroll right down you'll see that it's not plotting to the chart anymore and so that's the end of this demonstration we now have a trailing stop 180 our indicator so I can you can see if I hover my mouse on any of these candles the blue line up here that's plotting to the top left is the same as the actual ATR indicator in the bottom left down there so we can now remove this and we now have our trailing stop indicator and if account to the settings first of all you can adjust our values here see that we've titled our plot our drawings so that we can actually change the color of these so if you wanted a blue trailing stop and an orange a blue long trailing stop and an orange short trailing stop you can change that in here and of course if you wanted to adjust the ATR multiplier in come up here and have a one and a half eighty our multiplier that'll widen your stop-loss or if you want to change the look-back period of the ATR the ATR length you can change that in here to say calculate the ATR based on the past seven candles instead of the past 14 or you can adjust this so you might want to make this even less of a look-back so maybe three candle look back and now it will detect the highest high and highest low of the past three bars to draw our trailing stop above or below and there we have it I hope that all made sense if not feel free to leave any questions in the comment section I'll get back to you as soon as I can and the reason why I'm making this lesson is less than seven is because the future scripts that I go into are going to use the ATR indicator probably quite a lot so it's important we get this out of the way early and this is the simplest method I can think of to demonstrate how to actually use the ATR indicator on your charts so that brings me to the end of this lesson I hope you enjoyed it please leave any feedback in the comment section any suggestions of topics you'd like me to cover anything I missed or didn't make clear enough shoot me a question I'll get back to you as soon as I can I've been getting a lot of positive feedback from these lessons and it's really encouraging I'm really glad that you guys have finding value out of these lessons and I'm glad I'm helping you guys advance your own trading career this stuff has really dramatically improved my own trading and I'm just super grateful to have these tools at my disposal and I'm really excited to pass them on to you as always if you have any questions head over to Zen in the art of trading comm there's a link in the description I have heaps of lessons over there written lessons and a whole library of free indicators free scripts that I've created myself I've created dozens and dozens and dozens of scripts some of them premium you have to pay for them because they took me quite a long time to create like my my ultimate pull back indicator for example if I throw that on the chart this will just give you an example of what you can achieve when you master this skill so you can see here this indicator is plotting signals to the chart pullback signals so if I turn off lesson seven it's plotting my stop-loss one eighty are above the swing high and my target one eighty are below the entry point and it's using the EMA has changed color based on price action all of this stuff you I'll teach you guys how to do yourself but if you want to skip ahead head over to my website and check out some of my free indicators the source code for my free indicators is readily available so you can go there and use them as reference material if you want to that's it for today see you next time guys take it easy trade green and good luck with your coding [Music] you

Channel: The Art of Trading

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Keywords: forex trader, forex trading, forex, forex strategy, forex signals, forex trading live, live forex trade, best trading strategy, day trading, swing trading, technical analysis, price action, usdjpy, eurusd, gbpusd, trend following, pullbacks, fibonacci trading, learn to trade, learn forex, forex education, forex course, forex mentor, best forex signals, forex market, forex for beginners, pine script, pine, coding, tradingview, engulfing candles, atr, average true range

Id: Ly_vXHNaYnY

Length: 18min 50sec (1130 seconds)

Published: Fri Apr 03 2020