Volatility Cycle Indicator

1월 2일

The Volatility Cycle Indicator is a non-directional trading tool designed to measure market volatility and cycles based on the relationship between standard deviation and Average True Range (ATR). In the Chart GBPAUD 1H time frame you can clearly see when volatility is low, market is ranging and when volatility is high market is expanding.


This innovative approach normalizes the standard deviation of closing prices by ATR, providing a dynamic perspective on volatility. By analyzing the interaction between Bollinger Bands and Keltner Channels, it also detects "squeeze" conditions, highlighting periods of reduced volatility, often preceding explosive price movements.


The indicator further features visual aids, including colored zones, plotted volatility cycles, and highlighted horizontal levels to interpret market conditions effectively. Alerts for key events, such as volatility crossing significant thresholds or entering a squeeze, make it an ideal tool for proactive trading.

Key Features:

Volatility Measurement:
Tracks the Volatility Cycle, normalized using standard deviation and ATR.
Helps identify periods of high and low volatility in the market.

Volatility Zones:

Colored zones represent varying levels of market volatility:

• Blue Zone: Low volatility (0.5–0.75).
  
• Orange Zone: Transition phase (0.75–1.0).
  
• Green Zone: Moderate volatility (1.0–1.5).
  
• Fuchsia Zone: High volatility (1.5–2.0).
  
• Red Zone: Extreme volatility (>2.0).
  

Squeeze Detection:

Identifies when Bollinger Bands contract within Keltner Channels, signaling a volatility squeeze.
Alerts are triggered for potential breakout opportunities.
Visual Enhancements:

Dynamic coloring of the Volatility Cycle for clarity on its momentum and direction.
Plots multiple horizontal levels for actionable insights into market conditions.
Alerts:

Sends alerts when the Volatility Cycle crosses significant levels (e.g., 0.75) or when a squeeze condition is detected.

Non-Directional Nature:

The indicator does not predict the market's direction but rather highlights periods of potential movement, making it suitable for both trend-following and mean-reversion strategies.

How to Trade with This Indicator:

Volatility Squeeze Breakout:

When the indicator identifies a squeeze (volatility compression), prepare for a breakout in either direction.
Use additional directional indicators or chart patterns to determine the likely breakout direction.

Crossing Volatility Levels:

Pay attention to when the Volatility Cycle crosses the 0.75 level:
Crossing above 0.75 indicates increasing volatility—ideal for trend-following strategies.
Crossing below 0.75 signals decreasing volatility—consider mean-reversion strategies.

Volatility Zones:

Enter positions as volatility transitions through key zones:

• Low volatility (Blue Zone): Watch for breakout setups.
  

Extreme volatility (Red Zone): Be cautious of overextended moves or reversals.
Alerts for Proactive Trading:

• Configure alerts for squeeze conditions and level crossings to stay updated without constant monitoring.
  

Best Practices:
Pair the Volatility Cycle Indicator with directional indicators such as moving averages, trendlines, or momentum oscillators to improve trade accuracy.

Use on multiple timeframes to align entries with broader market trends.
Combine with risk management techniques, such as ATR-based stop losses, to handle volatility spikes effectively.

1월 2일

릴리즈 노트

- Removed redundant code

1월 3일

릴리즈 노트

- Chart Update

3월 10일

릴리즈 노트

Refined Squeeze Logic:

• Condition: Squeeze is now visualized only when volatilityCycle < 0.75 (low volatility) and diff < 0 (BB inside KC). This aligns with your statement that "squeeze is only relevant when relativity is low."
  
• Visualization: Plotted as black crosses at 0.3 when both conditions are met (plot(squeeze_active and volatilityCycle < 0.75 ? 0.3 : na)).
  
• Why It Makes Sense: Squeezes are most actionable in low-volatility environments, as high volatility might indicate an ongoing move rather than a buildup to a breakout. This refinement sharpens the focus on high-probability setups.
  

Momentum Oscillator:

• Calculation: Added a linear regression-based momentum indicator (val), which measures price deviation from a smoothed midpoint of highs, lows, and closes over lengthKC (default 20).
  
• Visualization: Plotted as candles at 0.3–0.5, colored based on momentum direction and strength:
  
• Bullish (above 0): Lime (increasing) or muted green (decreasing).
  
• Bearish (below 0): Red (increasing) or maroon (decreasing).
  
• Only visible when volatilityCycle > 0.75, tying momentum to higher volatility states.
  
• Purpose: Adds a directional layer to the non-directional volatility cycle, helping traders assess momentum during volatile periods.
  

Enhanced Visualization:

• Oscillator Coloring: volatilityCycle now uses dynamic colors (osc_color) based on its trend and sign (cyan/purple for rising, teal/light purple for falling), improving readability.
  
• Midline Coloring: mid_color reflects squeeze state (diff >= 0 is transparent green, diff < 0 is semi-transparent red), though it’s not plotted—possibly a leftover or future feature.
  
• ATR Distance Table: A new table displays the price’s distance from VWAP in ATR units (priceDistance), with green (above VWAP) or red (below VWAP) backgrounds. This adds context for volatility relative to a key price level.
  

Alerts:
Retained alerts for volatilityCycle crossing 0.75 and squeeze activation, though the latter is now tied to the refined logic.