Kaufman Efficiency Ratio Bitcoin Trading Analysis and Kaufman Efficiency Ratio Bitcoin Trading Signals

Developed by Perry Kaufman. Described in his book entitled "New Trading Systems and Methods".

The Kaufman Efficiency is a measures the ratio of the relative market speed in relation to the volatility. The Kaufman efficiency is often used by Bitcoin traders as a filter to help avoid trading when the btcusd trading market is "choppy" or flat ranging markets. The indicator also helps to identify smoother Bitcoin market trends. This is an oscillator indicator that oscillates between +100 and -100, where zero is the center point. +100 is upward trending market and -100 is downwards trending markets.

Kaufman Efficiency Ratio

The Efficiency indicator is calculated by dividing the net change in the btcusd price movement over an n number of periods by the sum of all the bar-to-bar btcusd price changes taken as the absolute values over these same n-periods.

Bitcoin Trading Analysis and Generating Bitcoin Trading Signals

The Kaufman is used to generate cryptocurrency signals as follows:

The smoother the manner in which the btcusd trading market is trending then the greater the Efficiency Ratio shown by the indicator. Efficiency Ratio value readings of around zero indicate a lot of inefficiency or "choppiness" in the btcusd trading market bitcoin trend movements (ranging cryptocurrency markets).

• If the Efficiency Ratio shows a reading of +100 for bitcoin crypto, then bitcoin is trending upwards with perfect efficiency.
• If the Efficiency Ratio shows a reading of -100 for bitcoin crypto, then that btcusd price is trending downwards with perfect efficiency.

However, it is almost impossible for a market bitcoin trend to have a perfect efficiency ratio since any retracement movement against the current bitcoin trend direction during the time period being used to calculate the indicator would decrease the efficiency ratio.

Bullish/Buy Bitcoin Trading Signal

Efficiency Ratio values above +30 indicate a smoother upward cryptocurrency trend.

Buy signal is generated above center-line mark.

Buy Crypto Trading Signal

Bearish/Sell Bitcoin Trading Signal

Efficiency Ratio values below -30 indicate a smoother downward cryptocurrency trend.

Sell Bitcoin Trading Signal is generated below zero center-line mark.

Sell Crypto Trading Signal

However, it is good you experiment with other values to determine the most appropriate levels for bitcoin being traded and the value that is the best for your bitcoin trading methodology that you are using.