Normalized Average True Range (14)

The Normalized Average True Range (14) is a volatility indicators indicator used in Skyrexio Strategy Builder for volatility assessment and risk management.

Introduction

The Normalized Average True Range (NATR) is a percentage-based volatility indicator that provides cross-asset comparison and relative volatility analysis for both LONG and SHORT strategies. This normalized version of ATR expresses volatility as a percentage of the closing price, making it possible to compare volatility across different cryptocurrencies and price levels effectively.

How Normalized Average True Range Works

Normalized Average True Range (NATR) expresses ATR as a percentage of the closing price, making it possible to compare volatility across different cryptocurrencies. Calculation: NATR = (ATR / Close) × 100. This normalization is particularly valuable in crypto markets where prices vary dramatically.

• Cross-asset comparison - Compare volatility between different cryptocurrencies regardless of price • Relative volatility - Measure volatility relative to current price level • Portfolio allocation - Allocate positions based on relative volatility • Risk assessment - Assess risk across different price ranges • Strategy selection - Choose strategies based on relative volatility levels

Normalized Volatility Psychology: NATR reveals the relative uncertainty in each asset regardless of price level. A $50,000 Bitcoin with 2% NATR has similar relative volatility to a $0.001 altcoin with 2% NATR. This makes NATR essential for portfolio management and cross-asset strategy selection.

Key Characteristics

Attribute	Details
Category	Volatility Indicators
Type	Normalized Volatility & Cross-Asset Comparison
Primary Use	Portfolio allocation, relative volatility analysis
Timeframe	All timeframes supported (1m to 1M)
Confirmation	Volume, price action, trend strength

Strategy Applications

🟢 LONG STRATEGY (Primary Use)

NATR is excellent for LONG strategies by enabling cross-asset volatility comparison, optimal portfolio allocation, and relative risk assessment across different cryptocurrencies.

Base Entry Order (LONG)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 3

AND

First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (50)
Timeframe: 1H

Additional Entry Orders (LONG)

Additional Entry 1: Moderate volatility confirmation
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 2

AND

First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 6

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

OR

Additional Entry 2: Low volatility breakout setup
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 1.5

AND

First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: High Price
Timeframe: 1H

Take Profit Orders (LONG)

Rule 1: Exit condition - High volatility warning
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 8

OR

Rule 2: Exit condition - Volatility normalization
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 2

AND

First Condition: RSI
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 70

OR

Rule 3: Exit condition - Relative volatility decline
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Cross Below
Second Condition: Simple Moving Average (10)
Timeframe: 1H

Stop Loss Orders (LONG)

Rule 1: Stop loss - Extreme volatility spike
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 12

OR

Rule 2: Stop loss - Relative volatility breakdown
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (50)
Timeframe: 1H

AND

First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 4

OR

Rule 3: Stop loss - NATR-based adaptive stop
First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 0.97

🔴 SHORT STRATEGY (Primary Use)

NATR is equally effective for SHORT strategies by enabling cross-asset volatility comparison and relative risk assessment for bearish market conditions.

Base Entry Order (SHORT)

Trigger Type: Once per bar close
Bar TF: 1H
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 3

AND

First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Simple Moving Average (50)
Timeframe: 1H

Additional Entry Orders (SHORT)

Additional Entry 1: Moderate volatility confirmation
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 2

AND

First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 6

AND

First Condition: Volume
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (20)
Timeframe: 1H

OR

Additional Entry 2: Low volatility breakdown setup
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 1.5

AND

First Condition: Close Price
Timeframe: 1H
Operator: Less Than
Second Condition: Low Price
Timeframe: 1H

Take Profit Orders (SHORT)

Rule 1: Exit condition - High volatility warning
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 8

OR

Rule 2: Exit condition - Oversold with low volatility
First Condition: RSI
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 30

AND

First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Less Than
Second Condition: Value
Value: 2

OR

Rule 3: Exit condition - Relative volatility decline
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Cross Below
Second Condition: Simple Moving Average (10)
Timeframe: 1H

Stop Loss Orders (SHORT)

Rule 1: Stop loss - Extreme volatility spike
First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 12

OR

Rule 2: Stop loss - Relative volatility breakout
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: Simple Moving Average (50)
Timeframe: 1H

AND

First Condition: Normalized Average True Range (14)
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 4

OR

Rule 3: Stop loss - NATR-based adaptive stop
First Condition: Close Price
Timeframe: 1H
Operator: Greater Than
Second Condition: Value
Value: 1.03

Advanced Strategy Combinations

Cross-Asset Volatility Comparison

Setup

Portfolio Allocation Strategy:

• High NATR (>5%): Reduce position size, increase stop distance

• Medium NATR (2-5%): Standard position size and stops

• Low NATR (<2%): Increase position size, tighter stops

• Compare across assets: Allocate more to lower NATR assets

Execution

LONG Entry: Select lowest NATR assets + trend confirmation SHORT Entry: Select moderate NATR assets + breakdown confirmation Stop Loss: NATR-based adaptive stops (2-3x NATR percentage)

Volatility Regime Strategy

Setup Process:

1. Classify market volatility regime using NATR

2. Low NATR (<2%): Mean reversion strategies

3. Medium NATR (2-5%): Trend following strategies

4. High NATR (>5%): Breakout/breakdown strategies

Execution:

• Base Order: NATR-based regime identification

• Additional: Volatility confirmation with volume

• Take Profit: NATR-based profit targets

• Stop Loss: NATR-based adaptive stops

Multi-Asset NATR Strategy

Low Volatility Assets

NATR <2%: Stable assets for conservative strategies Strategy: Mean reversion, range trading Position Size: Increased (125% of standard) Stop Distance: Tighter (1.5x NATR)

High Volatility Assets

NATR >5%: Volatile assets for aggressive strategies Strategy: Trend following, breakout trading Position Size: Reduced (75% of standard) Stop Distance: Wider (3x NATR)

Risk Management Guidelines

NATR-Based Position Sizing

NATR Level	Position Size	Risk Level	Stop Distance
Very Low (<1%)	150%	Very Low	1.5x NATR
Low (1-2%)	125%	Low	2x NATR
Medium (2-5%)	100%	Medium	2.5x NATR
High (5-8%)	75%	High	3x NATR
Very High (>8%)	50%	Very High	3.5x NATR

Cross-Asset Risk Assessment

Portfolio Diversification

Strategy: Allocate across different NATR levels Low NATR: 40% allocation (stable base) Medium NATR: 40% allocation (balanced growth) High NATR: 20% allocation (high growth potential)

Risk Parity

Strategy: Equal risk contribution across assets Method: Adjust position sizes inversely to NATR Example: 2% NATR = 100% size, 4% NATR = 50% size

NATR Reliability Factors

High Reliability

✅ Consistent NATR patterns across timeframes ✅ NATR levels align with market conditions ✅ Volume confirmation of NATR signals ✅ Cross-asset NATR comparison makes sense

Low Reliability

❌ Extreme NATR spikes from news events ❌ NATR signals without volume confirmation ❌ Inconsistent NATR across timeframes ❌ NATR levels don't match market reality

Best Practices

For LONG Strategies

1. Asset selection - Choose assets with appropriate NATR for strategy

2. Position sizing - Adjust size inversely to NATR level

3. Stop placement - Use NATR multiples for adaptive stops

4. Portfolio balance - Diversify across NATR levels

For SHORT Strategies

1. Asset selection - Choose assets with appropriate NATR for strategy

2. Position sizing - Adjust size inversely to NATR level

3. Stop placement - Use NATR multiples for adaptive stops

4. Risk management - Monitor NATR for volatility spikes

Common Mistakes to Avoid

• Ignoring normalization - Using absolute ATR instead of NATR for comparison

• Fixed sizing - Not adjusting position size based on NATR

• Wrong comparison - Comparing NATR across different timeframes

• News events - Trading during artificial NATR spikes

Market Conditions Analysis

Market Type	LONG Strategy Effectiveness	SHORT Strategy Effectiveness
Low NATR (<2%)	🟢 High (mean reversion)	🟢 High (mean reversion)
Medium NATR (2-5%)	🟢 High (trend following)	🟢 High (trend following)
High NATR (5-8%)	🟡 Medium (breakout only)	🟡 Medium (breakdown only)
Extreme NATR (>8%)	🔴 Low (high risk)	🔴 Low (high risk)
Expanding NATR	🟡 Medium (prepare for moves)	🟡 Medium (prepare for moves)

Related Indicators

Indicator	Relationship	Link
Average True Range	Absolute volatility version	Average True Range
Standard Deviation	Alternative volatility measure	Standard Deviation
Bollinger Bands	Volatility-based bands	Bollinger Bands Upper
Volume	Confirms volatility moves	Volume

Conclusion

Normalized Average True Range is essential for cross-asset comparison and portfolio management in cryptocurrency markets. It enables fair comparison of volatility across different price levels and assets, making it crucial for professional portfolio allocation.

Key Takeaways

• PRIMARY USE: Cross-asset volatility comparison and portfolio allocation

• SECONDARY USE: Relative risk assessment and strategy selection

• ALWAYS: Adjust position sizes based on NATR levels across assets

• REMEMBER: NATR enables fair comparison regardless of price level

Success with Normalized Average True Range requires understanding that it's primarily a portfolio management and risk assessment tool. Use it to compare volatility across different cryptocurrencies and allocate positions appropriately based on relative risk levels.

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