ATR Ratio Indicator

ATR Ratio Indicator

The ATR Ratio indicator for MT4 displays the rise and fall in the volatility of an instrument

The ATR (Average True Range) Ratio indicator for MetaTrader 4 is a volatility-based indicator commonly used to identify the increase or decrease of volatility in the financial market. It analyses the market’s volatility by comparing the differences between the fast ATR and slow ATR of an asset during a trading session.

The indicator comes with a red line that oscillates across a horizontal bar as the market gains or loses volatility.

What does the ATR tell you?
The ATR indicator essentially displays the range moved by an asset within a trading period, which may be used to project the future movement of the asset. However, the ATR Ratio indicator works differently because it helps you to easily identify when there is an increase or decrease of volatility in the market.

How to Trade With The ATR Ratio Indicator for MT4

The above image shows the action of the ATR Ratio indicator on the EURUSD pair. The indicator determines the rate of the changes in the volatility of the price based on the level of the red oscillator line on the blue horizontal bar of the indicator.

Therefore, high volatility in the market is signaled when the red line crosses above the blue horizontal line. Conversely, low market volatility is depicted when the red line is below the horizontal blue line.

The ATR Ratio indicator cannot be used to find trade entry or exit prices like the regular ATR indicator that displays the trading range moved by an instrument, which is commonly used for trade entries/exits. This is because this technical indicator (ATR Ratio) works differently by oscillating up and down as the market volatility rises or falls.

However, you may look for a buying or selling opportunity when the red line is above the blue horizontal line, which indicates a strong bullish/bearish pressure.

Conclusion
The ATR Ratio indicator for MT4 is very instrumental in the financial trading industry because volatility is one of the major conditions a forex trader needs to consider before making a trade decision.