Adaptive ATR Using Kaufman’s Efficiency Ratio

Summary

The document describes a variation on Average True Range (ATR), a measure of market volatility based on the greatest of the current high–low range and the two gaps between current prices and the previous close. Conventional ATR smooths true range with a simple moving average.

This version applies Perry Kaufman’s Efficiency Ratio to make true range adaptive. It says the resulting indicator can be used in the same ways as standard ATR, but gives no calculation details for the adaptation, parameter guidance, examples, or performance evidence. Traders would need additional specification and testing to assess how the change affects signals or risk estimates.

Key ideas

• ATR derives true range from the current high and low and gaps relative to the previous close.
• The conventional indicator smooths true range with a simple moving average.
• This variant uses Kaufman’s Efficiency Ratio to adapt true range.
• The document gives no evidence or implementation details for evaluating the variant.

Tags

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