The Ultimate Volatility Indicator was created by Richard Poster (Stocks and Commodities July 2021 pg 21) and this is a very simple but effective indicator. The idea behind volatility indicators is that when the indicator rises above a certain threshold then volatility is high enough and you can make a good amount of money riding the trend in the current direction and then exit when volatility drops below the threshold or until the underlying trend changes.
I have included a threshold that you can change from the default but I would recommend trying out different values to see what works best for you. This indicator will let you know as soon as volatility increases and reacts very quickly. I have included strong buy and sell signals in addition to normal ones so darker colors are strong buy and sell signals and lighter colors are normal signals. Buy when the line turns green and sell when it turns red.
Please let me know if you would like to see me publish any other indicators!
the value tracks price and not just volatility and it's because you use the absolute difference between close-open without normalizing it with the base price...volatility indicators should be decoupled from price trends i think
ecletv
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Thanks! It works great, not very different but more useful than similar volatility ones.
I've made my own modifications combined with your color coding of the signals, and I've found some usefulness: I've added an 89 periods bollinger band and calculated with open/close or low/high, working with 20 instead of 14 to smooth it a little bit.
- Below band = low volatility possible squeeze. Few signals, no noisy.
- Crossover Superior band coloured in red= possible Support/ground (This can be seen coming from corrections, signaling the end of it, but sometimes its the beginning of a downtrend instead)
- Crossover superior band coloured in green (this period or the previous)= possible Resistance/ceiling (This can be seen as a divergence with price going up with also volatility going up)
Thanks!
cheatcountry
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@ecletv, Can you send me a pm with your modifications?
josean79
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Fantastic work, all the indicator you programmed are fantastic and this one I really love it.