ER-Adaptive ATR, STD-Adaptive Damiani Volatmeter [Loxx]

9 בספט׳ 2022

ER-Adaptive ATR, STD-Adaptive Damiani Volatmeter [Loxx] is a Damiani Volatmeter with both Efficiency-Ratio Adaptive ATR, used in place of ATR, and Adaptive Deviation, used in place of Standard Deviation.

What is Adaptive Deviation?
By definition, the Standard Deviation (STD, also represented by the Greek letter sigma σ or the Latin letter s) is a measure that is used to quantify the amount of variation or dispersion of a set of data values. In technical analysis we usually use it to measure the level of current volatility .

Standard Deviation is based on Simple Moving Average calculation for mean value. This version of standard deviation uses the properties of EMA to calculate what can be called a new type of deviation, and since it is based on EMA , we can call it EMA deviation. And added to that, Perry Kaufman's efficiency ratio is used to make it adaptive (since all EMA type calculations are nearly perfect for adapting).

The difference when compared to standard is significant--not just because of EMA usage, but the efficiency ratio makes it a "bit more logical" in very volatile market conditions.

The green line is the Adaptive Deviation, the white line is regular Standard Deviation. This concept will be used in future indicators to further reduce noise and adapt to price volatility .

See here for a comparison between Adaptive Deviation and Standard Deviation

What is Efficiency Ratio Adaptive ATR?
Average True Range (ATR) is widely used indicator in many occasions for technical analysis . It is calculated as the RMA of true range. This version adds a "twist": it uses Perry Kaufman's Efficiency Ratio to calculate adaptive true range

See here for a comparison between Efficiency-Ratio Adaptive ATR, and ATR.

What is the Damiani Volatmeter?
Damiani Volatmeter uses ATR and Standard deviation to tease out ticker volatility so you can better understand when it's the ideal time to trade. The idea here is that you only take trades when volatility is high so this indicator is to be coupled with various other indicators to validate the other indicator's signals. This is also useful for detecting crabbing and chopping markets.

Shoutout to user xinolia for the DV function used here.

Anything red means that volatility is low. Remember volatility doesn't have a direction. Anything green means volatility high despite the direction of price. The core signal line here is the green and red line that dips below two while threshold lines to "recharge". Maximum recharge happen when the core signal line shows a yellow ping. Soon after one or many yellow pings you should expect a massive upthrust of volatility . The idea here is you don't trade unless volatility is rising or green. This means that the Volatmeter has to dip into the recharge zone, recharge and then spike upward. You can also attempt to buy or sell reversals with confluence indicators when volatility is in the recharge zone, but I wouldn't recommend this. However, if you so choose to do this, then use the following indicator for confluence.

And last reminder, volatility doesn't have a direction! Red doesn't mean short, and green doesn't mean long, Red means don't trade period regardless of direction long/short, and green means trade no matter the direction long/short. This means you'll have to add an indicator that does show direction such as a mean reversion indicator like Fisher Transform or a Gaussian Filter. You can search my public scripts for various Fisher Transform and Gaussian Filter indicators.

Price-Filtered Spearman Rank Correl. w/ Floating Levels is considered the Mercedes Benz of reversal indicators

Comparison between this indicator, ER-Adaptive ATR, STD-Adaptive Damiani Volatmeter [Loxx], and the regular Damiani Volatmeter [Loxx]. Notice that the adaptive version catches more volatility than the regular version.


How signals work

• RV = Rising Volatility
  
• VD = Volatility Dump
  

Plots

• White line is signal
  
• Thick red/green line is the Volatmeter line
  
• The dotted lower lines are the zero line and minimum recharging line
  

Included

• Bar coloring
  
• Alerts
  
• Signals
  

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Damiani Volatmeter [loxx]