Overview

The Momentum ATR Filter is a precision entry tool that combines momentum analysis with adaptive ATR (Average True Range) envelope filtering. It is designed for traders who want to enter trades only when momentum, volatility, and volume all point in the same direction. By requiring confluence across these three dimensions, the indicator significantly reduces false entries compared to single-factor strategies.

At its core, this indicator asks a simple but powerful question: is the current momentum strong, is the move exceeding normal volatility bounds, and is volume confirming the action? Only when all three answers are “yes” does a signal fire. This makes it one of the most selective indicators in the Volensy catalog, delivering fewer but higher-quality trade opportunities.

The Momentum ATR Filter is a premium indicator, available to Volensy members with an active Gold or Platinum subscription.

How It Works

The indicator operates through three interconnected analysis modules that must reach consensus before generating a signal.

Module 1: Adaptive ATR Range Filtering

The Average True Range measures market volatility by calculating the average range of recent candles. This indicator uses ATR to create an adaptive envelope (or channel) around price:

• The upper ATR band sits above the moving average by a configurable ATR multiplier.
• The lower ATR band sits below the moving average by the same multiplier.

When price breaks above the upper ATR band, it indicates an unusually strong upward move. When price breaks below the lower band, it signals unusually strong downward pressure. These breakouts form the first condition for a signal.

The envelope adapts to current volatility. During calm periods, the bands tighten, making breakouts more sensitive. During volatile periods, the bands widen, requiring stronger moves to trigger.

Module 2: RSI Trend Zone (30-80)

The RSI (Relative Strength Index) is used as a trend zone filter rather than a traditional overbought/oversold oscillator. The indicator defines a bullish zone between RSI 50-80 and a bearish zone between RSI 20-50:

• LONG signals require RSI to be in the 50-80 range, confirming upward momentum without being overbought.
• SHORT signals require RSI to be in the 20-50 range, confirming downward momentum without being oversold.

This prevents the indicator from generating buy signals into extreme overbought conditions or sell signals at extreme oversold levels.

Module 3: Volume Spike Confirmation

The final filter checks that the signal candle’s volume is at least 20% above the recent average volume. This is a lighter volume requirement than the Order Flow indicator’s 200% threshold, but it still ensures that real participation backs the price movement.

Signal Output

When all three modules confirm:

• LONG — Price breaks above ATR upper band + RSI in 50-80 zone + volume 20%+ above average.
• SHORT — Price breaks below ATR lower band + RSI in 20-50 zone + volume 20%+ above average.

The standard TP/SL system activates:

• TP1 — 0.5% from entry
• TP2 — 1.0% from entry
• TP3 — 1.5% from entry
• Stop Loss — 2.0% from entry

Key Features

• Adaptive ATR envelopes — Volatility-responsive bands that tighten in calm markets and widen in volatile ones, ensuring signals adapt to current conditions.
• RSI trend zone filtering — Uses RSI as a trend direction filter (not overbought/oversold), keeping entries aligned with prevailing momentum.
• Volume confirmation — Requires 20%+ above average volume to validate the breakout.
• Three-factor confluence — Signals only fire when momentum, volatility breakout, and volume all agree.
• Real-time info panel — Displays entry price, PnL, success rate, trade duration, and signal status.
• Multi-level TP/SL — Three take profit targets and a fixed stop loss.
• Bar coloring — Candlesticks colored to reflect active signal direction.
• Configurable alerts — Set alerts for signal entries, TP hits, and SL triggers.

Configuration / Settings

| Parameter | Default | Description |
|———–|———|————-|
| ATR Length | 14 | Period for calculating the Average True Range. |
| ATR Multiplier | 1.5 | Multiplier applied to ATR to set the envelope band distance from the moving average. Higher values create wider bands (fewer but stronger signals). |
| RSI Length | 14 | Period for the Relative Strength Index calculation. |
| RSI Bullish Zone Min | 50 | Lower bound of the RSI bullish zone. LONG signals require RSI above this value. |
| RSI Bullish Zone Max | 80 | Upper bound of the RSI bullish zone. LONG signals require RSI below this value. |
| RSI Bearish Zone Min | 20 | Lower bound of the RSI bearish zone. SHORT signals require RSI above this value. |
| RSI Bearish Zone Max | 50 | Upper bound of the RSI bearish zone. SHORT signals require RSI below this value. |
| Volume Average Period | 20 | Number of candles for calculating average volume. |
| Volume Threshold | 20% | Minimum percentage above average volume required on the signal candle. |
| TP1 Level | 0.5% | First take profit target. |
| TP2 Level | 1.0% | Second take profit target. |
| TP3 Level | 1.5% | Third take profit target. |
| Stop Loss | 2.0% | Maximum loss threshold. |
| Show ATR Bands | On | Toggle visibility of the ATR envelope bands on the chart. |
| Show Info Panel | On | Toggle the floating stats panel. |
| Show Bar Colors | On | Toggle candlestick coloring. |

Trading Signals

LONG Signal

A green LONG label appears when:

• Price closes above the upper ATR envelope band.
• RSI is between 50 and 80 (bullish trend zone).
• Current candle volume is 20%+ above the rolling average.

This signal means that price has broken through its normal volatility range to the upside, momentum is confirmed by RSI, and volume participation supports the move.

SHORT Signal

A red SHORT label appears when:

• Price closes below the lower ATR envelope band.
• RSI is between 20 and 50 (bearish trend zone).
• Current candle volume is 20%+ above the rolling average.

This indicates a downside volatility breakout confirmed by bearish momentum and adequate volume.

Signal Resolution

Signals remain active until a TP level is hit, the SL triggers, or a new opposing signal fires.

Best Practices

Recommended Markets

• Crypto — All major and mid-cap pairs. The ATR envelope adapts well to crypto’s variable volatility.
• Forex — Major and cross pairs, especially during active sessions. The ATR bands adjust to each pair’s typical volatility.
• Stocks — Individual equities with consistent volume. Works well on both intraday and swing timeframes.
• Commodities — Gold, silver, and crude oil. The ATR filtering is particularly effective on commodity breakouts.

Recommended Timeframes

• 15-minute — Good for intraday precision entries with moderate signal frequency.
• 1-hour — Recommended balance of signal quality and frequency.
• 4-hour — High-conviction entries for swing traders.

Tips

1. Watch the ATR bands — When the bands are tight (low volatility), a breakout signal is often the start of a strong move. Tight bands followed by a signal can produce excellent risk-reward setups.
2. RSI zone context — An RSI at 55 with a LONG signal has more room to run than an RSI at 78. Consider the RSI position within the zone when assessing how much upside potential remains.
3. Pair with support/resistance — Signals that coincide with a break of a key horizontal level carry additional conviction.
4. Use TP levels progressively — Take partial profit at TP1, move stop loss to breakeven, and let the remainder target TP2 and TP3.

Related Documentation

*See also: Indicators Overview*
*See also: Understanding the TP/SL System*
*See also: Using the Info Panel*
*See also: ATR & SuperTrend* — Another ATR-based indicator with SuperTrend trailing stop logic.
*See also: Order Flow Volume Spike* — A volume-focused indicator with deeper order flow analysis.
*See also: Indicator Comparison Guide*