Vola2vola Volatility indicator

22 Mei 2023

Hello everyone!


For those who remember vola2vola volatility script, we are excited to bring it back within the Myfractalrange Tradingview account!

As you know, Volatility is very important to assets and many people use it to trade. This tool automate the calculation of the volatility of every asset as well as provide an estimated value of its "Trend" and "Trade".

The idea in this script is to allow users to have an idea of the current volatility regime of the asset he is monitoring: Is its volatility Bullish or Bearish Trend, Bearish or Bullish Trade? Is its volatility compressed to a previous minimum value? Is it about to experience a spike in volatility? Let's dig together into how this tool works and how you could integrate it into your trading shall we?


What are the data provided by the script, let see one by one:
- Volatility: The value of what vola2vola calls the "synthetic" volatility of the asset is calculated using a custom formula based on the VIXFIX formula. Default colour is blue
- Trade : Trade is generated using an arbitrary and fixed look back period, it acts as a short-term trend. It will give the user the possibility to know if the volatility of the asset is still trending short-term or not. Default colour is black
- Trend: Trend is also generated using an arbitrary and fixed look back period (20 times the one used for Trade), it acts as a longer-term trend. It works the same way as Trade and will give the user the possibility to know if the volatility of the asset is trending a longer-term basis or not. Default colours are: red when the Trend of the volatility of the asset is Bearish and green when the Trend of the volatility of the asset is Bullish
- 52-weeks high & low: Based on the highest and lowest value of Volatility in the past 52 weeks, a 52-weeks high and a 52-weeks low will be marked. These values usually acts as Resistance and Support for volatility. Default colour is black and they are in dotted lines


Here are some of the questions you need to know the answer to before using this script:
- How do you define a "Bullish/Bearish volatility Trade"? Volatility is Bullish Trade is when Volatility is above Trade and it is Bearish Trade when volatility is below Trade
- How do you define a "Bullish/Bearish volatility Trend"? Volatility is Bullish Trend is when Volatility is above Trend and it is Bearish Trend when volatility is below Trend
- On which time frame should i use this script? You want to use the Daily time frame. Although, for short term moves in the volatility space, users could monitor the Hourly timeframe


Understanding the volatility of an asset, along with the bullish or bearish nature of its Trade and Trend, is crucial for investors. Assets with decreasing volatility tend to appreciate in value, while those with increasing volatility tend to depreciate. Therefore, we recommend investors be aware of the volatility situation of the asset they are holding in their portfolio.

Here are the different scenarios that you will encounter on a Daily timeframe and how to interpret them:
- Volatility is below Trade & Trend and Volatility is Bearish Trade and Trend: It is the most Bullish set up for the price of an asset
- Volatility is above Trade & Trend and Volatility is Bullish Trade and Trend: It is the most Bearish set up for the price of an asset
- Any other set up suggests uncertainty, caution is therefore recommended


These are some cases that you could experience while using this script:
1) Bearish Volatility set up on a daily timeframe:

In this example using SPY, when its Volatility is Bearish Trend on a daily timeframe, the price of SPY tends to appreciate

2) Bullish Volatility set up on a daily timeframe:

In this example using SPY, when its Volatility is Bullish Trend on a daily timeframe, the price of SPY tends to depreciate


We hope that you will find these explanations useful, please contact us by private message for access.
Enjoy!

DISCLAIMER: No sharing, copying, reselling, modifying, or any other forms of use are authorised. This script is strictly for individual use and educational purposes only. This is not financial or investment advice. Investments are always made at your own risk and are based on your personal judgement. Myfractalrange is not responsible for any losses you may incur. Please invest wisely.