An indicator measuring stock extension from moving averages using Average True Range (ATR) percentage multiple. Helps traders identify potential pullback or exit points based on price deviation.
Explore complementary indicator rolesHow it works
The indicator calculates the ATR percentage multiple from a selected moving average, typically the 50-day Simple Moving Average (SMA). It measures how far the current price has deviated from the chosen moving average by expressing the distance as a multiple of the Average True Range.
By comparing the price's distance from the moving average against a configurable threshold, the indicator generates signals when the stock becomes significantly extended. Traders can customize the moving average type and the ATR percentage multiple threshold to suit their specific trading strategy and market conditions.
Why it may be useful
This signal helps traders quantify price extension and potential mean reversion opportunities by providing a systematic approach to measuring how far a stock has moved from its average price. It offers a standardized method to identify potential overbought or oversold conditions across different market caps and trading styles.
By using ATR percentage multiples, traders can adapt their exit or partial profit-taking strategies based on the stock's volatility and historical price behavior. This approach provides a more dynamic and context-aware method of managing trade risk compared to fixed percentage-based exit strategies.
When to explore it
The indicator works best in trending markets where stocks tend to deviate from their moving averages before returning to the mean. It is particularly useful for traders looking to manage risk and optimize exit strategies across different market capitalizations.
For small and mid-cap stocks, a threshold of 7-10 ATR% multiples from the 50 SMA might signal potential partial profit-taking, while large-cap stocks might show mean reversion signals at lower 3-5 ATR% multiples. Traders should backtest the indicator with their specific trading instruments to determine the most effective threshold.
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What we’ve verified
Access, alerts and repainting behaviour have not been independently verified for this indicator. Check the creator’s current publication and settings.
General descriptions and classifications are recovered research. Verified details above identify the specific checks we have completed. Check the creator’s current publication for later changes.
