Kaufman Efficiency Ratio Bitcoin Analysis & Kaufman Efficiency Ratio Trading Signals

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

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

Kaufman Efficiency Ratio

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

Bitcoin Analysis and How to Generate Trading Signals

The Kaufman is used to generate signals as follows:

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

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

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

Buy signal gets generated above center-line mark.

Buy Signal

Bearish/Sell Signal

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

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

Sell 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 technique that you're using.