I'm seeing websites computing ATR% with (ATR / close) * 100
, and I believe this yields unintuitive results.
Let's take the popular ADR indicator as a simpler example. Its absolute value, without accounting for the averaging, is the distance between high and low high - low
. Its relative value, used for computing the ADR% indicator popularized by Kristjan Kullamägi, is (high / low - 1.0) * 100.0
, which essentially represents how stretched a candle is.
If we were to apply the relative formula recommended for the ATR% to compute our ADR%, we'd get (high - low) / close * 100.0
. This represents an awkward distance between the high and low relative to the candle's close. For two candles having the same height, their ADR% could vastly differ depending depending on where the close is located within that candle's range. This isn't really what we want, is it?