What Is The Normalized Average True Range?

Average True Range (ATR) is a handy measure of volatility, but it has downsides. Because it is derived from range (or to be a precise true range) and expressed as an absolute dollar value, it is not directly comparable across securities and over time. Because the Normalized Average True Range is normalized, it can be more useful than the Average True Range when comparing across different price levels. Normalized average true range is calculated by normalizing the Average True Range.

Normalized Average True Range Indicator

The Normalized Average True Range is a volatility indicator, and it attempts to normalize the average true range values across instruments.

How To Calculate The Normalized Average True Range

Formula:- NATR = ATR(n) / Close * 100

*Where: ATR(n) = Average True Range over ‘n’ periods

Why Use The Normalized Average True Range

Normalized Average True Range is a measure of volatility, and since it is normalized, it can be more valuable than Average True Range when comparing across different price levels. In general, Normalized ATR is better than traditional ATR in situations that involve comparing different securities or different time periods.

How to Use The Normalized Average True Range Trading Strategy

Bearish Scenario:- Since NATR is similar to ATR, it is used to see the volatility of the market. If the value of NATR increases significantly it generally means that the market is highly volatile and the prices are moving in a downtrend.

Bullish Scenario:- Similarly, if the value of NATR decreases significantly it generally means that the market is highly volatile and the prices are moving in an uptrend.

Building The Normalized Average True Range Trading Strategy in Mudrex

Strategy:- 

BUY:- MACD crosses down 5 with a signal period of 14 days.

SELL:- MACD crosses up 5 with a signal period of 14 days

TIME FRAME:- 6Hrs

Creating on Mudrex:- 

We will use 2 NATR indicator blocks – one for selling and one for buying.

For buying, we will use the following settings:-

For selling, we will use the following settings:-

Final Strategy:-

Testing:- 

Running on Binance Futures: BTC/USDT with tick interval of 6H yielded an overall profit of 245.96%

Links