Bybit Arbitrage is a trading tool that simplifies arbitrage trading by capitalizing on funding rate and price differences.

If you're seeking consistent returns with minimal risk, Bybit Arbitrage is the perfect ally.

 This robust tool empowers you to generate regular profits with minimal risks by capitalizing on price disparities across different markets. Its user-friendly interface lets you easily spot and exploit these differences, so that you can execute flawless arbitrage trading in the crypto market with confidence. Read on to learn how Bybit Arbitrage makes arbitrage trading an effortless way for you to achieve low-risk gains.

 is the buying and selling of the same or similar asset(s) at the same time across different markets to earn from slight price deviations. This act of purchasing an asset at a fixed price — while simultaneously selling it at a higher price — allows a trader to instantly make profits without any risks. 

While arbitrage trading has long been a staple in traditional financial markets, such as stock and forex, the advent of crypto trading has propelled arbitrage trading to new heights — thanks to the heightened volatility of the crypto market. Additionally, unlike traditional stock markets, crypto markets are traded 24/7, offering more opportunities for arbitrage traders to reap profits from the price gaps across exchanges and markets. 

 across exchanges or within a single exchange. Keep in mind that if you opt to arbitrage trade across different platforms, accessing your profits may prove to be complex, due to the need to transfer your assets between the exchanges, which can take up to several days to complete. On the other hand, arbitrage trading on a single platform is more straightforward — but more competitive as well.

There are multiple arbitrage trading strategies, but the most common ones in the crypto market include funding rates arbitrage, spot-futures arbitrage and futures arbitrage. 

Funding rates arbitrage allows traders to profit from variations in funding rates between 

 contracts. In contrast, spot-futures arbitrage enables traders to profit from price disparities between the spot and 

 for the same asset. Meanwhile, futures arbitrage involves profiting from price discrepancies between futures contracts with different expiration dates.

Bybit Arbitrage is a trading tool that helps traders identify arbitrage trading opportunities in two ways: funding rate and spread. 

The user-friendly interface organizes trading pairs based on either funding rates or spreads in different markets, so that traders can easily spot disparities in funding rate or price across the markets at a glance. 

Bybit Arbitrage is exclusively available to 

 mode. It facilitates arbitrage trading for USDT Perpetual, USDC Perpetual and USDC Futures contracts, thereby allowing you to enjoy arbitrage trading opportunities between USDT 

Spot pairs and USDT Perpetual pairs, or USDC Spot pairs and USDC Perpetual/Futures pairs. 

The Funding Rate Arbitrage feature exploits differences in funding rates between the Spot and Perpetual/Futures markets on the Bybit exchange. With the Funding Rate feature, traders can earn funding fees while simultaneously managing their positions in order to minimize potential losses and maximize gains through positive and negative arbitrage strategies.

Funding rates for the different trading pairs are listed in descending order. This helps traders to easily leverage the interest rate differential between Spot and Perpetual/Futures contracts.

The Funding Rate feature also allows you to 

 orders (with the same amount, but in different directions) in both Spot and Perpetual/Futures, which enables you to earn funding fees while mitigating potential losses (with potential gains).

holders in Futures/Perpetual contracts pay short position holders. You can leverage this situation by executing a positive arbitrage, which involves

 buying a Spot pair and taking a short position in 

Perpetual to earn steady funding fees. Alternatively, if the funding fee is negative, short position holders pay long position holders. In this case, you would perform a negative arbitrage by shorting a Spot pair and going long in a 

The Spread Arbitrage feature helps traders capitalize on price discrepancies between different markets for the same cryptocurrency asset. With this feature, you can easily compare the market prices of an asset traded across various trading pairs and contracts. While Spread Arbitrage may be similar to spot-futures arbitrage, it offers more arbitrage opportunities since it covers a broader range of markets, unlike spot-futures arbitrage, which targets specific markets

With Spread Arbitrage, the aim is to profit from the eventual price convergence as you buy the crypto asset at a lower price in one market (e.g., Spot) and sell it at a higher price in another market (e.g., Futures). 

As the futures price will eventually align with the Spot price when the contract expires, you’ll be able to take advantage of the simultaneous price disparity for the same asset.

In order to trade with Bybit Arbitrage, you’ll first need to 

. Currently, Bybit Arbitrage is exclusively accessible via the 

 for the web version, which will be launched soon!

Bybit Arbitrage offers multiple advantages.

Bybit Arbitrage is a powerful tool for traders seeking low-risk gains in the volatile crypto market. With its intuitive interface and exclusive features, traders can effectively leverage funding rate and price differences to maximize profits while minimizing risks. Bybit Arbitrage offers diverse benefits that make arbitrage trading more accessible and profitable than ever before.

Beginner

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How to Use Bybit Arbitrage to Achieve Funding Rate and Price Difference Arbitrage

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of Ether and allows investment through traditional stock markets. Learn more.

Earlier this year, the U.S. Securities and Exchange Commission (SEC) gave the green light to a number of Bitcoin Spot exchange-traded funds (

), sparking optimism that similar approval might be extended to Ethereum Spot ETFs. Adding to the excitement, news of Ethereum Spot ETF approval in Asia’s first region has heightened anticipation for a potential approval and launch in the U.S. However, despite the buzz, some industry observers remain skeptical. This article explores the potential impact of Ethereum Spot ETF approval on the broader crypto market.

An Ethereum Spot ETF is an exchange-traded fund that tracks the real-time price of 

 and allows investment through traditional stock markets. It offers investors a way to invest in Ether without having to actually buy or hold the asset itself.

An Ethereum Spot ETF operates by pooling investor funds to purchase Ether, which is held in reserves by the ETF.

Rather than navigating the complexities of 

 and exchanges, investors buy shares of the ETF through regular brokerage accounts, just as they would with traditional stocks. These shares represent a stake in the Ether held by the ETF, providing a simple and regulated way to own Ethereum indirectly.

In order to create ETF shares, authorized participants — usually financial institutions — purchase Ether in exchange for ETF shares of equal value, which are then sold onto the market. An authorized participant can also redeem shares by buying enough ETF shares and exchanging them for Spot Ether and taking those shares away from the market.

As a result, the price of ETF shares tends to fluctuate in line with Ethereum's Spot market price. If it didn’t, there would be an 

 opportunity to profit from any mispricings in the ETF price. However, it’s still theoretically possible for the ETF to trade at different prices simply because of supply-and-demand factors.

ETFs as securities are regulated by the SEC, so an Ethereum Spot ETF provides a regulated product that investors can purchase. By contrast, Spot Ether is being investigated by the SEC to determine whether it should be classified as a security, and currently lacks regulatory clarity. 

This setup offers numerous benefits for investors. It simplifies the investment process, allowing anyone with a brokerage account to invest in Ethereum without setting up a crypto exchange account or managing storage. This can save time and give some investors greater peace of mind. An ETF structure also provides the regulatory clarity that institutional investors need, which can enhance liquidity and trading volumes.

Security is paramount in the realm of cryptocurrency, and the ETF provider takes it seriously. To safeguard Ether holdings, ETF providers employ a combination of 

 and insured custodial services. As a result, they could potentially minimize the risk of theft or loss that individual crypto investors may encounter.

The Ethereum Spot ETF bridges traditional finance (TradFi) and the exciting (but still growing) cryptocurrency space. It offers the security and ease of trading associated with traditional financial markets while opening up investment opportunities in Ethereum for a broader audience.

Both excitement and regulatory scrutiny characterize the current landscape of Ethereum Spot ETFs. Major financial institutions like 

 and Fidelity have submitted applications for these ETFs to the SEC. Still, decisions have been delayed, with the next 

If applicants begin updating their filings by April, this may indicate they’re incorporating feedback from the regulator, which could be interpreted as a positive sign. However, a lack of updates to filings could indicate that the SEC isn’t maintaining the same level of discussions with issuers that led to its 

Another challenge is that the SEC is still investigating whether Ether should be classified as a security, especially since it transferred its consensus mechanism to 

. Earning rewards through staking could meet criteria that determine whether an asset is a security. Ethereum also provides a foundation for 

 (DeFi), which could add to the complexity of the review. 

Analysts' opinions vary regarding the likelihood of ETH ETF approval. One Bloomberg analyst, for instance, 

 chance of approval by May. However, the SEC's recent silence might hint at a less favorable outcome.

The approval of Ethereum Spot ETFs is eagerly awaited because it could mirror the impact of Bitcoin Spot ETF approval, which led to an influx of capital in the market. It would mark a pivotal milestone, likely to attract increased investment and further validate cryptocurrency. The crypto community is closely monitoring these developments, as the coming months will be crucial in shaping the future of Ethereum investment opportunities.

 was recently given to the first Spot Bitcoin and Ethereum ETFs in one of the Asian regions. This landmark decision positions the city as a trailblazer in the Asian financial landscape, embracing the integration of popular cryptocurrencies into mainstream investment avenues.

This milestone has sparked excitement within the crypto community, indicating a positive reception toward digital assets in that region. Analysts believe this move could set a precedent for other jurisdictions to follow, potentially leading to broader acceptance and recognition of cryptocurrencies as a legitimate asset class.

These newly approved ETFs are expected to attract a wave of fresh investors — both retail and institutional — by offering a regulated and familiar investment option for exposure to cryptocurrencies. This growth of interest could increase stability in the crypto markets, possibly influencing the price movements of Bitcoin and Ethereum in the region.

The timing of this approval is noteworthy, considering that the U.S. could also be on the cusp of approval of an Ethereum Spot ETF. If this proactive approach inspires other financial centers beyond the U.S. to consider similar approvals, it will palpably contribute to the global expansion and maturation of the cryptocurrency market.

Current Impact of Ethereum Spot ETF Applications on the Crypto Market

The buzz surrounding Ethereum Spot ETF applications is noticeably affecting the crypto market, particularly Ethereum's price and overall sentiment. Submission of new ETF applications to the SEC has coincided with an 

, pushing it to around $3,700. This uptick reflects the market's optimism and positive sentiment regarding the potential for easier access to Ethereum. However, the market has exhibited some volatility as well, with Ether dropping over 14% in a week in early April. 

Despite these fluctuations, there's a general expectation that ETF developments would significantly impact Ethereum's price dynamics, similar to what was observed with the recent Bitcoin Spot ETF approvals. Moreover, the recent approval of cryptocurrency ETFs has further fueled optimism and positive expectations for increased investment inflows and a broader recognition of cryptocurrencies.

To sum up, the current impact of Ethereum Spot ETF applications on the crypto market is marked by heightened anticipation along with some volatility. Ethereum's price is responding to changes in the regulatory landscape and the potential for broader adoption of cryptocurrency-based investment products.

What Will It Mean if an Ethereum Spot ETF Application Is Approved?

The approval of an Ethereum Spot ETF application by the SEC would mark a significant milestone for the cryptocurrency market, especially for Ethereum. Following are some of the potential benefits.

Drawing parallels to the earlier Bitcoin Spot ETF approvals, some pundits expect an initial surge in Ethereum's price following the expected announcement, reflecting renewed confidence and interest in Ether as an asset. Over the long term, Ethereum Spot ETFs could contribute to growth and stability, similar to the impact that Bitcoin Spot ETFs have had on BTC’s price.

However, there are key differences to consider. The SEC's cautious stance on Ethereum — notably because of its PoS consensus mechanism — could influence the approval process and subsequent market reactions. In addition, Ethereum's unique ecosystem, including its role in DeFi and 

, could lead to different market responses as compared to those following the Bitcoin Spot ETF approvals.

The potential approval of Ethereum Spot ETFs is a crucial turning point for the crypto market, promising easier access, increased investment and greater legitimacy. Although short-term price fluctuations may occur, the long-term effects could echo the positive growth recently witnessed with Bitcoin Spot ETFs, promoting a more mature investment environment for Ethereum.

Intermediate

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Ethereum Spot ETF Approval: Its Impact on Crypto Markets

Grayscale Investments has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca.

Daily Top Performer — Automata Network (ATA)

The SPX index is up 0.02%, investor focus on earnings and U.S. interest rates continues. The broader cryptocurrency market is down, with Bitcoin and Ether dropping by 3.78% and 2.41%, respectively in the past 24 hours.

Today’s outperformer is ATA, which jumped 8.9% after Automata launched Multi-Prover AVS on Eigenlayer Holesky Testnet to boost decentralized security.

Automata Network (ATA), founded in 2019, is a Web3 platform providing private web services for decentralized applications, focusing on secure, anonymous transactions and governance. Key features include a private voting system and MEV minimization to enhance user privacy and security. Automata's Multi-Prover AVS, which utilizes TEE Coprocessors to enhance security, is now available on the Eigenlayer Holesky testnet. This system employs the TEE Prover as a secondary security measure in decentralized systems. Operators, restakers, and developers are encouraged to learn more about this advancement on their website.

Check Out the Latest Prices, Charts, and Data of 

Grayscale Investments, the world's largest crypto asset manager, has filed a registration statement on Form S-3 with the SEC to register shares of its Grayscale Ethereum Trust (ETHE) as part of efforts to uplist the trust to a spot Ethereum ETF on the NYSE Arca. This filing follows NYSE Arca’s application and is a crucial step in the regulatory process required for offering shares continuously upon approval. The shares will not be sold until the registration is declared effective, and this offering is subject to the Securities Act of 1933. Grayscale emphasizes that the trust, not registered under the 1940 Act, involves high risk and volatility, is focused solely on Ethereum, and does not offer direct investment in Ethereum.

BlackRock's spot bitcoin ETF, IBIT, has significantly impacted the firm's overall ETF flows, comprising 24% of its total. Eric Balchunas, Bloomberg's Senior ETF Analyst, highlighted the fund's success during a panel on Hong Kong's newly approved spot crypto ETFs. Since its launch in January, IBIT has attracted consistent inflows for over 70 days, accumulating more than $18 billion in assets under management and becoming one of the most successful ETFs in history. The IBIT fund is second only to Grayscale's ETF in terms of assets but has seen remarkable trading volume along with other spot bitcoin ETFs, totaling nearly $230 billion.

Gamium, supported by Parachain Ventures, DAO Maker, and Mr. Beast among others, has its token $GMM listed on major exchanges with a fully diluted valuation of around $43M. The platform is promoting a beta points airdrop to reward early users, where participants can sign up and earn points through various activities like launching an MST, trading, daily logins, and referrals. Details on point earning and distribution are available in a dedicated blog post. However, potential users are cautioned to research due to the inherent risks associated with DeFi protocols and trading.

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Grayscale Files for SEC Registration to Convert Ethereum Trust into a Spot ETF on NYSE Arca

Sharky is a Solana-based lending and borrowing DeFi solution that utilizes NFTs as loan collateral.

Cryptocurrency lending and borrowing has always been a prominent niche of the decentralized finance (

) industry, championed by platforms like Aave (

). A much rarer variant of DeFi borrowing and lending is based on non-fungible tokens (

Sharky.fi, or simply Sharky, is a Solana-based lending and borrowing protocol that uses NFTs as collateral to facilitate the DeFi processes on the network. By putting up NFTs as collateral, users can borrow funds via short-term loans in Solana's native SOL tokens. For lenders, the platform is also a great way to earn high APY rates in just 7 to 14 days, while having their loaned funds protected by the NFTs.

Having established itself as the leader of NFT-based lending and borrowing on Solana, the Sharky project has ambitious plans to integrate two more highly popular crypto asset types — Ordinals and real-world assets (RWAs).

 (SHARK) is a lending and borrowing app on the 

 (SOL) blockchain that lets users provide NFTs as collateral to access short-term loans in SOL tokens.

 Lenders can view NFTs offered as collateral, and make loan offers secured by their preferred NFTs.

Although Sharky's public launch on the Solana mainnet dates back to April 2022, the platform operated without its 

, SHARK, for its first two years in the market. The SHARK token was eventually launched in mid-April 2024.

Using its innovative business concept, Sharky quickly established itself as the leader of NFT lending. According to the project’s team, Sharky has a 90% share of the NFT lending market on Solana and has issued more than 1.4 million NFT loans.

Following the recent launch of its SHARK token, the project aims to integrate additional crypto asset types in the future. These include 

 (RWAs). Another ambitious product type considered for future implementation on the platform is uncollateralized consumer loans.

As a lender on Sharky.fi, you can browse NFTs from a variety of collections offered on the platform and make a loan offer for potential borrowers. The collections available on Sharky include the platform's own 

 collection, Mad Labs, Solana Monkey Business (SMB), Tensorians, Namaste and more. Lenders’ offers are shown to potential borrowers on the platform, who then choose the best offer based on their borrowing needs.

The NFT provided by the borrower is used as collateral, and the lender makes their funds available in SOL tokens. Lenders earn interest on the funds, with the loan duration typically between 7 and 14 days. Interest rates, naturally, will vary depending upon on-platform activity. Usually, 

 for active loans range between 120% and 220%, though they can go up to 360%. As such, Sharky loans are an excellent way for lenders to earn some serious interest quickly. If a borrower fails to repay the loan in full, the NFT used as collateral is transferred to the lender.

For borrowers, the Sharky platform is an excellent opportunity to access SOL funds for short-term needs quickly and flexibly using their NFTs, rather than cryptocurrency, as collateral. The best part of the platform's borrowing mechanism is that you remain in possession of your NFT during the loan period as a borrower. While your NFT is used as collateral, its ownership isn't transferred to the lender while the loan is active. The ownership transfer may only happen at the end of the loan period if you fail to repay the loan in full.

Maintaining the ownership of your NFT allows you to keep using it on various DeFi and other apps for purposes such as staking or satisfying 

 eligibility requirements, among other potential uses.

Sharx is the platform's own NFT collection. One of the most popular collections used in Sharky's lending and borrowing operations, sharx is made up of 10,111 adorable shark characters. Purchasing a sharx NFT not only opens up borrowing opportunities but also entitles you to upgrade or boost your Chowder points, rewards that are used in Sharky's loyalty program. 

As a sharx holder, you're entitled to the airdrop of Sharky.fi’s governance token, SHARK, and you can also stake sharx to earn FISHY tokens.

The newly launched SHARK token is envisioned as the platform's governance asset, with a total supply of 100 million. As of the time of writing in late April 2024, only some specific details on the actual governance processes powered by SHARK are available. Thus, the token's actual use in on-platform governance is expected to be outlined in the future.

SHARK will be airdropped in two phases, with 4.25% set aside for the first phase and 3.5% for the second. Of the former, 70% is allocated to its community, with the remaining 30% is distributed to partner communities. Meanwhile, the second phase is held as a staking pool event with a lockup duration of 30 to 60 days exclusively for OG, new users and sharx holders.

 of Sharky. Unlike the brand-new SHARK token, FISHY was issued back in 2022 at the start of the platform's operations. FISHY can be earned by staking sharx NFTs, accumulating reward points and participating in Sharky's social media campaigns. The token can be used to boost sharx NFTs, which in turn can earn you additional Chowder points. FISHY also gives you access to NFT raffles and auctions held on Sharky.

The SHARK token can be bought on Bybit through a Spot pair with USDT (

). Additionally, you can also take part in Bybit's current campaigns for the token for the chance to grab a share of the 

, which includes a Token Splash event featuring 456,000 SHARK through Apr 30, 2024, 9AM UTC, and a Lucky Draw with 58,000 SHARK in rewards through Apr 30, 2024, 9:59AM UTC.

Lending and borrowing using NFTs as collateral is a novel concept that has earned Sharky leadership positions in this niche. As more platforms adopting this business model emerge, the competition in the field is likely to intensify. However, as of now, Sharky remains the absolute leader of the Solana-based NFT lending and borrowing market. 

As NFTs experience a resurgence in popularity following the post-2021 dip, DeFi solutions that make innovative use of these assets, such as Sharky, stand to benefit. Later in 2024 and beyond, we’ll likely hear more about NFTs being used as legitimate collateral in crypto finance — a new trend helped to no small degree by the Sharky platform.

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Sharky.fi (SHARK): The Decentralized Platform for Instant NFT Loans

Trading

The average true range works exceptionally great in the volatile crypto market. But does it really work just as well as volatility indicator?

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Everyone wants to know when their favorite cryptocurrency will burst into volatility? And let’s be real, I’m guessing you’re no exception.

The good news is you no longer need to scratch your head. This ATR trading guide will lay down everything you need to know about market volatility so you won’t miss the ride.

The ATR is an indicator that helps traders to measure volatility and can assist you in finding the right markets to maximize profits. The best part, it’s also a good risk management tool to assess the perfect spot for your protective 

If your stop-loss is too wide, you risk losing more money than you might have wanted. On the other hand, if your stop-loss is too tight, you risk being knocked out of your trade prematurely.

The key is ATR must be used in conjunction with a trading strategy to gain a real edge in the market. In other words, it helps investors to use the volatility in their favor and not against them. 

So, What Exactly Is The Average True Range?

The average true range is an oscillator-based indicator that measures the market volatility. The ATR can be applied to any time-frame, and it is useful in any market (stocks, futures, cryptocurrencies, forex, more).

The purpose of ATR is to provide traders with information about how much an asset can move in a specific period. Hence, to help you get an idea about future volatility and therefore have more tools to manage the open positions according to the market environment.

Additionally, the average true range indicator is used to determine possible price targets, as well as a tool for placing stop-loss orders to have solid risk management.

This indicator suits the cryptocurrency market particularly because of the volatile nature. For this reason, the ATR is perfect to identify the possible price range of cryptocurrencies and help you act and manage your assets based on the information.

For example, in the next daily chart of BTCUSD, we can see how the ATR (lower panel) has increased during the last segment due to the increasing volatility. If traders expect volatility to increase, it should be taken into consideration before establishing the:

But, How Does ATR Works in Crypto Trading?

Generally, all indicators used in the Forex or stocks market can be adopted in crypto trading. And ATR is no exception. 

ATR works in a way to help you measure the changes in prices (volatility). It doesn’t matter if the price comes from a stock, a commodity, or a cryptocurrency. However, it works exceptionally well in crypto trading mainly because of the high levels of volatility. For example, in the case of Bitcoin, there have been periods where the price has run up to 990% in a year. Also, price plunges drastically, which behaves quite differently than the traditional market.

An interesting fact about ATR is, it is only meant to measure volatility. It should never be used as a buy or sell signal. 

That is because the ATR is supposed to give the possible range of movement for a given period. But it 

 define if the range is going to be made to the upside or the downside.

For example, if the daily ATR is $5, that means that the price is likely to have a daily range of $5 during the next session. So, if the price has already made the $5 to the upside, then taking a long position near the high of the day is not ideal. That is because the price has already made the average range for that day, and it is likely that the uptrend could lose momentum.

Therefore, to get the most of the ATR indicator, it must be used in combination with a trading system to get the trading signals. The ATR can be used to filter your entries.

However, before going through an example to clarify these concepts, it is important to notice that there are several ways how the ATR indicator can be drawn on the chart:

*Note: The ATR can be constructed either using price data from the current active time frame or using price data from a different time frame.

In the next example, we draw on the 1-hour BTCUSD chart the daily ATR (14 periods) projections for the day ahead (see red and green lines). The idea of using a lower time frame with the ATR is to define possible areas where the price is likely to find support or resistance.

In this particular example, the ATR is used in combination with price action analysis to find a high probability entry. Here you can see that the price went to the upper limit of the ATR, which means that the price has reached the top of the average daily range.

In this case, the inside down bar provides the entry signal, which is a high probability entry because it is at the top of the ATR of the daily time frame. Here you can see how combining price action with the ATR indicator can provide powerful trades.

Can I Really Use ATR to Find Market Trend? 

Trust me, it’s not only you who misinterpreted ATR with a trend indicator. In fact, there are even experts who think that too.

Truth is, ART is a volatility indicator. 

Remember, the ATR only illustrates how much volatility there is in the market. Such volatility is not always directional (trending markets) it can be presented in a sideways action.

If you still struggle to wrap your head around it, the next 

See how the prices show one downtrend followed by an uptrend? That action can be classified as a 

. In other words, the prices have a bigger range of movement. But nevertheless, that range not necessarily translates into a trending market. 

This is one of the reasons why the ATR must be analyzed in conjunction with a trading methodology.

The ATR is important because it offers the trader a sense of how volatile the market is. Also, based on that information and a solid trading strategy, the trader can have a competitive advantage in front of other traders.

It’s important to remember that the ATR must be used as a filter to take trades in good locations. The best part? It is also a powerful tool for defining stop loss levels and profit targets (these two concepts are explained below).

The ATR should be used by all market participants regardless of their investment horizon.

It’s because the ATR indicator is helpful to find high probability trades and have efficient trade management.

For day traders whose executions are on the 5-minute and 15-minute chart, the ideal ATR should be the daily average true range to have a reference of the levels where the price is likely to run. 

 should be the weekly and monthly average true range as the main references because the holding period of the positions is longer.

Explained: Using Average True Range Correctly

The correct use of the ATR must be done with a solid trading plan, proper risk management, and specific trading criteria. In other words, the proper use of the ATR should be done with more elements. Try including ATR with price movements, other technical indicators, and market context, that validate a position in the market.

To calculate the ATR, first, you have to calculate the current true range. These ranges are defined by the highest absolute value chosen from these three formulas:

In simpler words, we can define the price range of any given period as the difference between the lowest traded price and the highest traded price.

Secondly, the average is calculated taking as reference the true range of the previous periods, by default the ATR takes the last 14 periods for its calculation because its developer J. Welles Wilder, Jr took that number as his main reference; that is why almost all platforms have 14 periods by default. However, this number can be changed in the setting section.

Current ATR = ((Prior ATR x 13) + Current TR) / 14

A good period of calculation for ATR indicator is 14 periods because this is by default the number used by most of the trading platforms out there. So, a great number of retail and institutional traders likely take this level as the main reference.

It is important to always have in mind the 14-period ATR of relevant time frames like the 4h, daily, weekly, and monthly as the eyes of many market participants are in those levels.

The ATR is usually used as a trailing stop loss system as it allows using the volatility as a measure to protect the current positions in the market. Additionally, it helps to hold the trades for a longer time and get the most from trending markets.

Trailing stops should only be moved in the favor of the current position and never against it. Trailing SL is designed to limit risk and lock in profits without giving back too much of your profits.

The next 15-minutes Bitcoin chart is a good example of how to use the ATR to trail-stop losses.

After the price triggered the short entry at the break of the bearish flag and the market moves in our favor, then you should project the trailing stop level. It is calculated based on the sum of the current closing price and one time* the current ATR:

*Note: the number of times you can add or subtract the ATR depends on the trading style. Usually, the most common factors are 1-3 ATR.

In this particular example, the trailing stop loss level is drawn by an indicator that projects the level automatically for us (red line). That way, the work of the trader is to move the stop-loss order based on that reference.

Notice how this trailing stop system provided the short trade? It provides enough space to let the position run and take the most from the downtrend movement before a reversal took place.

The main advantage of placing targets with the ATR is that it gives clues about reasonable price targets based on the underlying volatility.

The ATR indicator gives a fair approximation of the possible range of the day ahead. But, to fine-tune your exits we need more than the ATR indicator. Setting price targets using the ATR indicator should be done in conjunction with a market structure like support and resistance levels, previous swing high/low points, moving average, more.

The next BTCUSD daily chart with the weekly ATR (14) (red line) is a great example of how to identify targets. 

For example, see how after the price made the double bottom, the main two targets were the resistance level A and B. However, the one with more chances of getting reached was area A because this is the point where the 

 is located, see how immediately the price touch that area it went down.

When we’re in a strong trading market, we can use multiple ATR as the place to take profit. Runaway markets are notorious for overshooting the ATR target.

So, for example, if the current daily Bitcoin ATR is $200, then you could place your profit target 2 or 3 times the ATR value. That would be a $400 or $600 profit target.

Here are the best practices on how to use ATR to set profit targets:

Using Average True Range to Spot False Breakout

Another use of the ATR indicator is to spot fake breakouts or fakeouts.

A false breakout usually happens when the price temporarily breaks above (below) a key consolidation pattern, support or resistance level, previous swing high, or swing low but immediately changes direction.

Most of the time, you can only tell if a breakout is real or not only after the fact. But, that’s of no use for traders. Imagine you’ve already missed a boat, so what’s the point of holding onto the hand rails? An easy way around this issue is to use the average true range which is a leading indicator.

The rule number one of trading false breakouts is to look for a divergence signal between the ATR indicator and the price action. In other words, if there is a disagreement between the ATR indicator and the price action, we’re potentially dealing with a false breakout.

For example, if a breakout below a support level is not accompanied by a rising ATR, it often shows a 

As a general rule, false breakouts tend to happen when the value of ATR is low.

In conclusion, to spot a false breakout using the ATR indicator simply look for these clues:

Many times, the best way to understand a concept is through a practical example. In this case, we are going to use the 15-minute Bitcoin chart to show how a trade could be executed and managed.

The entry is based on a moving average system (any technical analysis could be used). Here the long entry was triggered when the fast-moving average (10 SMA) crossed the slow-moving average (20 SMA) to the upside. The initial risk was below the most recent swing low (see the chart).

After the position goes in our favor, the trailing stop should be based on the average true range, which is the green line. So, when the price advances, the ATR line also advances. The trailing stop should always be moved in favor of the trade until the SL is triggered.

What Is Average True Range (ATR) & How to Use It for Trading?

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