Where to Chart the ATR Trailing Stop, the Trigger in SPY and the Developing Flag

This article updates the ATR Trailing Stop and shows how anyone can chart it. As noted in the first part, the Chandelier Exit and Parabolic SAR are lacking as far as I am concerned. The Chandelier Exit is fixed to the high based on a lookback period, which may or may not fit the current trade. Parabolic SAR is too volatile and complicated. The ATR Trailing Stop is based on price action since the buy signals, it is easy to understand and it makes sense.

Documentation and Charting Option

Sylvain Vervoort, a fellow Belgian, wrote dozens of articles for Traders.com and these included a two-part series on trailing stops. The second part covered the ATR Trailing Stop, which is pretty much the same one that I showed last week using Optuma.

Original Article from Vervoort
Code from Stocks & Commodities

This indicator is not available on StockCharts, but it is available on TradingView.com, even when using the free version. You will, however, have to register to access the indicator.

It is important to share new indicators and techniques, and also provide users with options to use these. Optuma is lacking in the sharing department. I signed up to TradingView using a Black Friday special last year. ChartList management is not as good as StockCharts, but the TradingView platform is faster, offers more indicators and is much more versatile. And I can share everything. Hmm…..

Anyone else using TradingView? Opinions or thoughts? Let me know.

Recap and Current Signal

To Recap: The ATR Trailing Stop equals the highest close since the signal less two ATR(22) values at the time of this high. After the breakout, this stop rises as long as prices rise and flattens after a peak. SPY broke out of its falling wedge on September 28th and recorded a closing high on October 12th (352.43). The ATR Trailing Stop rose until October 12th and then flatlined. ATR(22) was 5.73 on October 12th. Thus, the ATR Trailing Stop equals: 352.43 – (2 x 5.73) or 340.97.

After a breakout on September 28th and follow through, this stop triggered as SPY closed below the ATR Trailing Stop on Monday. Traders have two choices: exit on the open or set a sell-stop just below Monday’s low (335.62). The bigger trend is up, but volatility is picking up as we head into the election and could continue afterwards if the outcome is uncertain.

The next chart highlights the falling flag, which is still forming on the daily chart. This is a tight falling flag with a narrow range, which makes it easier for whipsaws (breaks below the upper and lower lines). Even so, the falling wedge breakout from September 28th is holding and a breakout at 346 would be bullish for the flag. RSI is also in the 40-50 zone and mildly oversold with Monday’s decline.

ATR Trailing Stop on TradingView

Now let’s look at a TradingView version of the ATR Trailing Stop, CDC ATR Trailing Stop V2.1 (2013) by piriya33. This indicator is in the public domain at TradingView. It is the same indicator as the one shown in the Optuma chart and the one from Vervoort. The chart below shows this indicator triggering an exit in early September with the long black candlestick and another exit with the close below 340.97 on Monday.

As you can see from the chart above, the ATR Trailing Stop did not turn green until September 30th, which is when SPY closed above the stop. Chartists trading the wedge breakout would have had to use the falling wedge low as an initial stop and then turn to the trailing stop when prices rise. In general, I like to set my initial stop just below the low before the breakout and then make adjustments should prices continue higher.

The image below shows the settings used. Clearly this indicator is more dynamic because there are more options. For now, I am keeping the Fast and Slow Periods the same (22), and the Fast and Slow Multipliers the same (2).

You may have noticed that this chart also includes StochClose(125,5), which I coded and added to TradingView. You can find this indicator by clicking the “Fx” icon in the upper left part of the chart and searching for “StochClose”. The ATR Trailing Stop indicator can be found by searching for “ATR Trailing Stop V2”. This trailing stop has been on TradingView since 2013! 

Thanks for tuning in and have a great day!

-Arthur Hill, CMT
Choose a Strategy, Develop a Plan and Follow a Process