The Average True Range (ATR) is a widely-used indicator in crypto trading. It is great for understanding how volatile a specific cryptocurrency is. However, there is a serious limitation with ATR. You cannot easily compare the volatility of one cryptocurrency to another using ATR because the ATR value depends on the price of the cryptocurrency.
To overcome this limitation, we have another indicator called the Average True Range Percentage (ATRP). This indicator helps us compare the volatility of different cryptocurrencies and find out which one is more volatile. Let’s learn more about ATRP.
ATRP is a tool which is getting more and more popular day by day. Though it is majorly used in cryptocurrency trading to measure and compare how volatile different cryptocurrencies are, it has limitless possibilities.
In short, ATRP is useful for making informed decisions when choosing which cryptocurrencies to trade based on their relative volatility.
The Average True Range Percentage indicator works by representing the ATR indicator as a percentage. This approach enables crypto traders to assess the volatility of various cryptocurrencies, regardless of their varying token prices. For instance, without ATRP, it might wrongly appear that a less expensive cryptocurrency is less volatile than a more costly one, solely due to its lower ATR value. In simple terms, ATRP evens the comparison field, simplifying the assessment of volatility in the realm of crypto trading.
Calculating ATRP is simple. There is a simple formula for that.
| ATRP = (Average True Range / Close) * 100 |
To calculate ATRP, divide the Average True Range by the closing price of the cryptocurrency and then multiply the result by 100.
ATRP helps crypto traders assess and compare the volatility of cryptocurrencies. A higher ATRP indicates greater price swings, making it useful for risk management and trade decision-making.
For instance, if ATRP is high, it may be riskier to enter a trade.
Also Read: Unlocking the Power of MFI in Crypto Trading
ATRP is a valuable tool in cryptocurrency trading. It assists traders in understanding and comparing the volatility of different cryptocurrencies, aiding in informed decision-making. However, it is important to note that ATRP has limitations. Anyway, balancing risk and reward is crucial for success in the dynamic world of crypto trading.
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