OPEN-SOURCE SCRIPT
Normalized Volatility
OVERVIEW
The Normalized Volatility indicator is a technical indicator that gauges the amount of volatility currently present in the market, relative to the average volatility in the market. The purpose of this indicator is to filter out with-trend signals during ranging/non-trending/consolidating conditions.
CONCEPTS
This indicator assists traders in capitalizing on the assumption that trends are more likely to start during periods of high volatility compared to periods of low volatility. This is because high volatility indicates that there are bigger players currently in the market, which is necessary to begin a sustained trending move.
So, to determine whether the current volatility is "high", it is compared to an average volatility for however number of candles back the user specifies.
If the current volatility is greater than the average volatility, it is reasonable to assume we are in a high-volatility period. Thus, this is the ideal time to enter a trending trade due to the assumption that trends are more likely to start during these high-volatility periods.
HOW DO I READ THIS INDICATOR
When the column's color is red, don't take any trend trades since the current volatility is less than the average volatility experienced in the market.
When the column's color is green, take all valid with-trend trades since the current volatility is greater than the average volatility experienced in the market.
The Normalized Volatility indicator is a technical indicator that gauges the amount of volatility currently present in the market, relative to the average volatility in the market. The purpose of this indicator is to filter out with-trend signals during ranging/non-trending/consolidating conditions.
CONCEPTS
This indicator assists traders in capitalizing on the assumption that trends are more likely to start during periods of high volatility compared to periods of low volatility. This is because high volatility indicates that there are bigger players currently in the market, which is necessary to begin a sustained trending move.
So, to determine whether the current volatility is "high", it is compared to an average volatility for however number of candles back the user specifies.
If the current volatility is greater than the average volatility, it is reasonable to assume we are in a high-volatility period. Thus, this is the ideal time to enter a trending trade due to the assumption that trends are more likely to start during these high-volatility periods.
HOW DO I READ THIS INDICATOR
When the column's color is red, don't take any trend trades since the current volatility is less than the average volatility experienced in the market.
When the column's color is green, take all valid with-trend trades since the current volatility is greater than the average volatility experienced in the market.
Open-source script
In true TradingView spirit, the author of this script has published it open-source, so traders can understand and verify it. Cheers to the author! You may use it for free, but reuse of this code in publication is governed by House rules. You can favorite it to use it on a chart.
Disclaimer
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