Kaufman Efficiency Ratio Bitcoin Crypto Technical Analysis and Kaufman Efficiency Ratio Bitcoin Crypto Signals

Created by Perry Kaufman. Described in his book entitled "New Trading Systems & Techniques".

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

Kaufman Efficiency Ratio

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

Technical Analysis and How to Generate Trade Signals

The Kaufman is used to generate bitcoin signals as follows:

The smoother the manner in which the bitcoin 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 bitcoin market bitcoin trend movements (ranging bitcoin markets).

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

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

Bullish/Buy Bitcoin Crypto Signal

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

Buy signal is generated above center-line mark.

Buy Signal

Bearish/Sell Bitcoin Crypto Signal

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

Sell Bitcoin Crypto 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 the crypto instrument being traded and the value that is the best for your btcusd methodology that you're using.