Parkinson Historical Volatility

8 Feb 2019

First off, a huge thank you to the following people:

theheirophant: tradingview.com/u/theheirophant/
alexgrover: tradingview.com/u/alexgrover/
NGBaltic: tradingview.com/u/NGBaltic/

The Parkinson Historical Volatility (PHV), developed in 1980 by the physicist Michael Parkinson, aims to estimate the volatility of returns for a random walk using the high and low in any particular period. An important use of the PHV is the assessment of the distribution prices during the day as well as a better understanding of the market dynamics. Comparing the PHV and a periodically sampled volatility helps traders understand the tendency towards mean reversion in the market as well as the distribution of stop-losses.

This script allows you to transform the volatility reading. The intention of this is to be able to compare volatility across different assets and timeframes. Having a relative reading of volatility also allows you to better gauge volatility within the context of current market conditions.

For the signal lie I chose a repulsion moving average to remove choppy crossovers of the estimator and the signal. This may have been a mistake, so in the near-future I might update so that the MA can be selected. Let me know if you have any opinions either way.

References
rdocumentation.org/packages/TTR/versions/0.23-4/topics/volatility
ivolatility.com/help/3.html

Want to Learn?

If you'd like the opportunity to learn Pine but you have difficulty finding resources to guide you, take a look at this rudimentary list: docs.google.com/document/d/10t3ZCQAd2dpdTGPYXDKk2hAM_BQ1Zm80tk0VGHViQc4/edit?usp=sharing

The list will be updated in the future as more people share the resources that have helped, or continue to help, them. Follow me on Twitter to keep up-to-date with the growing list of resources.

Suggestions or Questions?

Don't even kinda hesitate to forward them to me. My (metaphorical) door is always open.