Trade Management Strategy Using ATR and Moving Averages

FinanceTHIS Risk Strategy Makes MILLIONS🚨

TL;DR

A three-tier profit-taking strategy uses ATR multiples and moving average extensions to lock in gains at 10%, 8–10x ATR distance, and 10x+ ATR distance before trailing the final position until a 10-day moving average break.

Key Takeaways

1Take one-third profit when unrealized gains reach 10% (double the average daily range) in a trending market
2Remove another third of the position when price extends 8–10 times ATR above the 50-day moving average
3Exit a third tranche when price exceeds 10 ATR extensions from the 50-day moving average, signaling overextension
4Trail the remaining third of the position until price violates the 10-day moving average, then exit the entire remaining position
5Average daily range (ADR) over 20 days is used as the baseline metric to define initial profit-taking thresholds

Notable Quotes

“I'll take a third of the trade off so then I'm left with 2/3 of the trade.”
— Trader

“If price is about 8 to 10 times ATR multiple from the 50-day moving average, I'll take another third off.”
— Trader

“By definition it's considered extended to me, that's when I'll take the next third off.”
— Trader

Chapters

1. Initial Profit Lock-In

Exit one-third of the position when unrealized profit reaches 10%, which is double the average daily range over the last 20 days.

2. Managing Extended Price Action

Remove another third when price extends 8–10 times the ATR from the 50-day moving average, indicating the move is getting stretched.

3. Exiting Extreme Extensions

Take off the third tranche when price reaches more than 10 ATR extensions from the 50-day moving average, confirmed by green dot indicators flashing.

4. Trailing the Final Position

Allow the remaining third to trail the market after already being up 50% on the total trade, exiting completely on a violation of the 10-day moving average.

Glossary

ADR (Average Daily Range): The average price movement range of a security over a specified period (in this case, the last 20 days)
ATR (Average True Range): A volatility indicator that measures the average distance price moves from the 50-day moving average on a given day
50-day Moving Average: The average closing price over the last 50 days; used as a baseline to measure price extensions and overextension
10-day Moving Average: The average closing price over the last 10 days; a violation signals an exit trigger for the final position
Breakout: When price moves above a previously established resistance level, often indicating the start of a trending move
Unrealized Profit: The profit on a currently open trade that has not yet been closed or locked in
Trailing: Allowing a position to remain open while following price action higher, using a moving average or support level as an exit trigger

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