Conditional Volatility Explosion/Contraction

28 Nov 2024

This indicator identifies zones of potential volatility expansion by analyzing the contraction and expansion of volatility bands, which are conditioned by the relationship of the price to moving averages

Volatility Squeeze: When the bands contract, it indicates a potential buildup in market tension, often preceding a significant price movement.

Volatility Expansion: When the bands expand, it signals the release of built-up tension, often resulting in increased volatility.

Trend Confirmation: The bands are active only when the price aligns with the moving average condition, helping to filter out less relevant signals during non-trending markets.

Upper Band: Displays as a red band when the volatility condition is met.
Represents the upper boundary of potential price action during high volatility.

Lower Band: Displays as a green band when the volatility condition is met.
Represents the lower boundary of potential price action during high volatility.

Fill Areas: The areas between the EMA and the bands are filled with transparent colors:

• Red for the upper fill.
  
• Green for the lower fill.
  

These highlights help visualize zones of potential volatility explosion.

28 Nov 2024

Nota Keluaran

small bug fix

30 Nov 2024

Nota Keluaran

This script, titled "Volatility Explosion/Contraction by Oberlunar", visualizes volatility dynamics in the market and identifies potential areas of price contraction or expansion. It uses a combination of statistical measures and moving averages to provide actionable insights.

Volatility Calculation:

Computes market volatility based on logarithmic price returns.
Highlights periods of high and low volatility using percentile thresholds.

Dynamic Bands:
Generates upper and lower bands conditioned on price relative to moving averages.
Bands are calculated using a combination of EMA (Exponential Moving Average), standard deviation, and ATR (Average True Range).
Bands are only plotted when the price is below specific moving averages (indicating a contraction zone).

Percentile Volatility Analysis:

Tracks volatility percentiles over a customizable period to identify significant expansions or contractions in price.

Customizable Parameters:

Periods for short, medium, and long exponential moving averages.
Multiplier settings for standard deviation and ATR.
Thresholds for high and low percentile conditions.

Visual Representation:

Fills between bands for intuitive visualization of contraction zones:
Red fill for potential upper boundaries.
Green fill for potential lower boundaries.

Usage:
This indicator is suitable for traders looking to identify price regions where volatility is likely to "explode" or "contract," offering clues for breakout or reversal opportunities. Adjust the parameters to align with your trading strategy and preferred time frame.