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ATR Ratio - VertexFX Indicator

ATR Ratio (Average True Range Ratio) is a VertexFX Client Side VTL Indicator. It plots the ratio between a long-term ATR and a short-Term ATR. ATR is a measurement of market volatility, when the price trend is strong, ATR values rise and consolidation is marked by low ATR values. ATR ratio shows the present market volatility in relation to long term market volatility. It is calculated by dividing the short term ATR with Long term ATR. ATR Ratio above one indicates the current market volatility is higher.
How to Use ATR Ratio Indicator
The ATR ratio indicator does not generate trading signals, it is a confirmatory indicator. When a new trend begins, usually the indicator value climbs above one. Identify the direction of the trend from chart with the help of moving averages or trend lines and then initiate trades when the ATR ratio indicator climbs above one. The image shows a short trade setup. After a consolidation, price breaks below the moving average. As you can see in the area highlighted by vertical box, price remains below the MA and ATR ratio climbs above one. This is the ideal time to open a short trade.

When the ATR ratio falls below one and stays there, it is clearly telling that the trend has lost momentum. Open positions can be closed when this happens, and wait for the next breakout.

ATR Ratio can be customized through the parameters. Long Term ATR Period and Short Term ATR period are defined by the parameters. Default values are 7 and 49. To change the parameter values, open the script in VTL editor by right clicking on the indicator name in navigator and select edit. The script is now opened in the VTL editor. Parameters are located at the top of the script file. Change the parameter values, save and compile. Apply again to chart for the new parameter values to take effect.

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