[blackcat] L1 Dynamic Volatility Indicator

2023년 9월 10일

The volatility indicator (Volatility) is used to measure the magnitude and instability of price changes in financial markets or a specific asset. This thing is usually used to assess how risky the market is. The higher the volatility, the greater the fluctuation in asset prices, but brother, the risk is also relatively high! Here are some related terms and explanations:

- Historical Volatility: The actual volatility of asset prices over a certain period of time in the past. This thing is measured by calculating historical data.
- Implied Volatility: The volatility inferred from option market prices, used to measure market expectations for future price fluctuations.
- VIX Index (Volatility Index): Often referred to as the "fear index," it predicts the volatility of the US stock market within 30 days in advance. This is one of the most famous volatility indicators in global financial markets.

Volatility indicators are very important for investors and traders because they can help them understand how unstable and risky the market is, thereby making wiser investment decisions.

Today I want to introduce a volatility indicator that I have privately held for many years. It can use colors to judge sharp rises and falls! Of course, if you are smart enough, you can also predict some potential sharp rises and falls by looking at the trend!

In the financial field, volatility indicators measure the magnitude and instability of price changes in different assets. They are usually used to assess the level of market risk. The higher the volatility, the greater the fluctuation in asset prices and therefore higher risk. Historical Volatility refers to the actual volatility of asset prices over a certain period of time in the past, which can be measured by calculating historical data; while Implied Volatility is derived from option market prices and used to measure market expectations for future price fluctuations. In addition, VIX Index is commonly known as "fear index" and is used to predict volatility in the US stock market within 30 days. It is one of the most famous volatility indicators in global financial markets.

Volatility indicators are very important for investors and traders because they help them understand market uncertainty and risk, enabling them to make wiser investment decisions. The L1 Dynamic Volatility Indicator that I am introducing today is an indicator that measures volatility and can also judge sharp rises and falls through colors!

This indicator combines two technical indicators: Dynamic Volatility (DV) and ATR (Average True Range), displaying warnings about sharp rises or falls through color coding. DV has a slow but relatively smooth response, while ATR has a fast but more oscillating response. By utilizing their complementary characteristics, it is possible to construct a structure similar to MACD's fast-slow line structure. Of course, in order to achieve fast-slow lines for DV and ATR, first we need to unify their coordinate axes by normalizing them. Then whenever ATR's yellow line exceeds DV's purple line with both curves rapidly breaking through the threshold of 0.2, sharp rises or falls are imminent.

However, it is important to note that relying solely on the height and direction of these two lines is not enough to determine the direction of sharp rises or falls! Because they only judge the trend of volatility and cannot determine bull or bear markets! But it's okay, I have already considered this issue early on and added a magical gradient color band. When the color band gradually turns warm, it indicates a sharp rise; conversely, when the color band tends towards cool colors, it indicates a sharp fall! Of course, you won't see the color band in sideways consolidation areas, which avoids your involvement in unnecessary trades that would only waste your funds! This indicator is really practical and with it you can better assess market risks and opportunities!

2023년 9월 11일

릴리즈 노트

correct the color definiation a little bit

릴리즈 노트

OVERVIEW
The [blackcat] L1 Dynamic Volatility Indicator provides a visual representation of market volatility using a combination of True Range (TR) and Average True Range (ATR). This indicator normalizes these values to create a dynamic volatility index that adapts to changing market conditions. With customizable parameters and gradient coloring, it offers traders a clear view of volatility trends 📉💹.

FEATURES

Calculates True Range (TR) based on high, low, and closing prices.
Computes the Average True Range (ATR) over a specified period:
Length: Number of bars considered in ATR calculation.
Multiplier: Factor applied to scale the ATR value.
Normalizes TR and ATR values for better comparison across different assets and timeframes.
Plots two lines representing normalized true range average and DVI value with distinct colors:
Normalized True Range Average: Yellow line.
Dynamic Volatility Index (DVI): Fuchsia line.
Uses gradient coloring to visually represent changes in RSI-based volatility levels 🌈
Includes horizontal thresholds at key levels (0.2 and 0.0) for additional context.
HOW TO USE

Add the indicator to your TradingView chart by selecting it from the indicators list.
Adjust the length parameter to define how many bars are included in the calculations.
Set the desired multiplier to scale the ATR value according to your preferences ⚙️.
Monitor the plotted lines and gradient fill areas to observe volatility trends.
Use the thresholds as reference points for identifying periods of high or low volatility.
LIMITATIONS

The indicator may not capture all nuances of market volatility due to its reliance on historical data.
Users should combine this indicator with other forms of analysis for more reliable trading decisions.
The effectiveness of the indicator may vary depending on the asset and timeframe being analyzed.
NOTES

Ensure that you have sufficient historical data available for accurate calculations.
Test the indicator thoroughly on demo accounts before applying it to live trading 🔍.
Experiment with various settings to find optimal parameters for your specific needs.