Trading Using ATR Normlise trigonometric angle of EMA 50 slope

Where:

  • EMA_{current} - EMA_{n}: The vertical change (rise) over n bars.

  • \text{ATR}: The Average True Range (typically 14 periods) used to normalize the price distance.

  • n: The lookback period for the slope (often 1 bar for immediate slope or 5-10 bars for trend).

  • 180/\pi: Converts the result from radians to degrees.

​Implementation Steps

  1. Calculate the EMA 50: Determine the current value and the value n bars ago.

  2. Calculate the ATR: Use a standard 14-period ATR to gauge the "unit of movement" for that specific asset.

  3. Normalize the Slope: Divide the EMA difference by the ATR. This tells you how many "volatility units" the average moved per bar.

  4. Apply Arctangent: Use the formula above to get a degree between -90^\circ and +90^\circ.

​Why Use ATR for This?

  • Scale Independence: An EMA rising 10 points on a \$50 stock is massive, but on a \$50,000 asset, it is negligible. ATR-based angles treat both relatively.

  • Trend Strength: A 45^\circ ATR-normalized slope indicates that the EMA is moving up by exactly 1 ATR per bar—a very strong, high-momentum trend.

  • Filtering Noise: If the price is moving but ATR is also very high (high volatility), the angle will appear "flatter," warning you that the trend is messy rather than clean.

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About 2 months ago

Author

AJIT MADHUKARRAO SABANE

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