Volatility Expansion Indicator - D_Quant

Volatility Expansion Indicator - D_Quant |V|C|E|

1. Concept & Overview
The Volatility Expansion Indicator (VCE) is a composite quantitative tool designed to identify robust trend states by aggregating signals from three distinct market dimensions: Relative Position (Volatility), Cyclical Momentum, and Price Velocity.

Unlike single-source indicators which often generate false positives during choppy markets, the VCE utilizes a "Consensus Engine." It normalizes signals from Bollinger %B, CCI, and ROC into a unified trend score (-1 to +1). This score drives the visual coloring of the price action and background, allowing traders to instantly gauge whether the market is in a state of volatility expansion (trending) or contraction (ranging).

2. Methodology & Calculation
The core logic relies on a weighted aggregation of three technical components. Users can toggle these components on or off in the settings to isolate specific market mechanics.

A. Component 1: Bollinger %B (Relative Positioning)

Logic: Measures where the price is located relative to the Bollinger Bands.

Bullish Condition: If %B > 0.5 (Price is operating in the upper hemisphere of the bands).

Bearish Condition: If %B < 0.0 (Price has broken below the lower band).

Purpose: Filters out weak trends by ensuring price is statistically significant relative to its recent volatility.

B. Component 2: CCI (Commodity Channel Index)

Logic: Measures current price levels relative to an average price level over a specific period.

Thresholds: A standard +100 / -100 threshold is used. Values above 100 add to the bullish score; values below -100 add to the bearish score.

Purpose: Identifies cyclical momentum extremes.

f_cci(_len) =>
cci_val = ta.cci(close, _len)
val = 0
if cci_val > 100
val := 1
if cci_val < -100
val := -1
val

C. Component 3: ROC (Rate of Change)

Logic: Calculates the percentage change between the current price and the price n periods ago.

Thresholds: Simple zero-line crossover. Positive ROC implies bullish velocity; negative implies bearish.

Purpose: Provides a raw directional bias based on pure price speed.

D. The Aggregation Engine: The script sums the active signals and divides by the number of active components.

Bullish Trend: Composite Score > 0 (Visualized as Deep Navy).

Bearish/Neutral: Composite Score ≤ 0 (Visualized as White).

E. Multi-Timeframe (MTF) Capability: The indicator includes a request.security module. This allows you to calculate the consensus trend on a higher timeframe (e.g., Daily) while viewing price action on a lower timeframe (e.g., 15-minute), ensuring you are trading in alignment with the macro trend.

// NEW: Timeframe Selection
tf_input = input.timeframe("", "VCE Timeframe", group=grp_sets, tooltip="Empty = Current Chart. Set to 'D' for fixed Daily trend.")
[v1, v2, v3] = request.security(syminfo.tickerid, tf_input, [f_pct_b(bb_len, bb_mult), f_cci(cci_len), f_roc(roc_len)], lookahead=barmerge.lookahead_on)

3. Visualizations
The indicator overlays the following elements on the chart:

Trend SMMA: A central Smoothed Moving Average (SMMA 20) representing the mean.

Volatility Bands: Upper and Lower bands calculated at 2 Standard Deviations from the SMMA.

Bar Coloring:

Navy Blue: Indicates a confirmed Volatility Expansion (Bullish Confluence).

White: Indicates Neutrality, Retracement, or Bearish conditions.

Dynamic Fills: The space between the bands fills with color to highlight the strength of the current regime.

4. How to Use
Trend Following: Look for the bar color to switch to Navy. This indicates that momentum, volatility, and velocity have aligned bullishly. This is often an entry trigger for long positions.

Exits: When the bars switch from Navy back to White/Gray, the volatility expansion has ceased or momentum is diverging. This serves as a warning to tighten stops or take profits.

MTF Filter: Set the "VCE Timeframe" input to "D" (Daily). Trade on the H1 chart. Only take long positions when the Daily VCE paints the background/bands in the Bullish color.

5. Settings
Bollinger %B: Adjust Length and Multiplier (Default: 20, 2.0).

CCI: Adjust Length (Default: 23).

ROC: Adjust Length (Default: 50).

Signal Components: Toggle specific logic blocks on/off to customize the sensitivity of the composite score.

VCE Timeframe: Select the resolution for the calculation (Leave empty for current chart).

Disclaimer: This tool is for informational purposes only. Past performance of volatility expansion does not guarantee future results. Always manage risk appropriately.