Adaptive ATR Channels Using Kaufman Efficiency Ratio

Summary

This indicator adapts an average true range channel using Perry Kaufman's efficiency ratio rather than the standard deviation ratio described in an earlier adjustable-bands approach. Its ATR component is adaptive and smoothed to produce less jagged bands. The author relates the result conceptually to a Keltner channel while distinguishing it through its calculation choices.

The document recommends using the channel in a manner similar to a Keltner channel, but does not specify entry or exit rules, parameter settings, markets, or test results. Its account is a brief description of indicator construction and possible usage, not evidence that the indicator improves trading performance. The adaptation and smoothing choices may affect signal timing and should be evaluated for the intended instrument and timeframe.

Key ideas

• The channel adapts ATR using Kaufman's efficiency ratio.
• The ATR is smoothed to make the channel bands less variable.
• The author presents the indicator as conceptually related to a Keltner channel.
• The suggested use resembles common Keltner channel applications, without detailed rules.
• No empirical performance evidence or parameter guidance is supplied.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.