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Tolerance Multiple (ATRs) |
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Tolerance Multiple (ATRs)
This parameter is used to set the number of ATRs to use when calculating the Tolerance value. Generally you would set this Tolerance Multiple parameter to a fractional value, such as 0.10 or 0.20, etc.
Tolerance is the percentage of price that constitutes a Break or a Touch of a trendline and is used to determine whether or not a trendline is valid. If a trendline is broken at any point between the oldest pivot and the Ignore Zone, the trendline is considered invalid and is discarded. Conversely, all data points between the beginning of a trendline and the end of a trendline are analyzed and each time the price is within the Tolerance value of the trendline at that point in time, the trendline's touch count is incremented. The high price is used when testing upper trendlines and the low price is used when testing lower trendlines. A Break is encountered if any price (high price for upper trendlines and low price for lower trendlines) exceeds the trendline by more than this amount. A Touch is encountered if any price (high price for upper trendlines and low price for lower trendlines) comes within (but does not exceed) this distance to a trendline (on either side of the trendline). Breaks and Touches are checked for between the oldest pivot and the Ignore Zone (which is generally the 3 most recent bars). In other words, a break that occurs within the last 3 bars of trading does not invalidate the trendline and this is how you identify trendline breakouts and breakdowns as they occur. In the S/R Analyst Pro script, Tolerance is calculated by taking a fractional Multiple of the security's ATR.
The available range is from 0 to 5 with 0.10 being the default setting.
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