This script attempts to estimate the targets that the current price may reach based on an exponentially weighted volatility model.
Overall, with the assumption of normal distribution of log return, which might not always hold true, it calculates the estimated range within which the current candles will close. One, two, and three sigma will give the probability of around 68%, 95% and 99% respectively.
This can be used to give you a better sense of what is possible with the current level of volatility , thus assist in risk management and position sizing.
Like with any indicators, it is recommended that you use this script as a confirmation to your strategy, and not take the estimated range blindly to carry out, for instance, mean-reversion trade. Again, it is merely an estimation with volatility at its core.
May you be on the right side of the trade.
Nota Keluaran
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Minor fixes
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Minor Fixes
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Minor Fixes
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Migration to Pine V5
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Bugs fixed
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Minor Update: - Add Robust Mode, the bands now act as more significant levels of support & resistance while maintaining its representativeness of estimated probability - Fix the bug that makes daily chart on index instruments off
@ninjanew, as you can see, if the candles attempt to make wicks (go beyond) the levels plotted ( for instance 1 sigma), 68% it will close the candle within the range (normal distribution assumption). This may, I repeat, may provide a super quick trade when you see the imbalance. Besides, on higher timeframe, it serves as great points of support and resistance to help you time your trade, maximize the R:R
TheStockOdin
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@henryph24, so basically a expected move? and deviation bands... nice work..