QuantraSystems

Scalper's Volatility Filter [QuantraAI]

Scalpers Volatility Filter

Introduction
The ๐’ฎ๐’ธ๐’ถ๐“๐“…๐‘’๐“‡'๐“ˆ ๐’ฑ๐‘œ๐“๐’ถ๐“‰๐’พ๐“๐’พ๐“‰๐“Ž ๐น๐’พ๐“๐“‰๐‘’๐“‡ (๐’ฎ๐’ฑ๐น) is a sophisticated technical indicator, designed to increase the profitability of lower timeframe trading.
Due to the inherent decrease in the signal-to-noise ratio when trading on lower timeframes, it is critical to develop analysis methods to inform traders of the optimal market periods to trade - and more importantly, when you shouldnโ€™t trade.
The ๐’ฎ๐’ฑ๐น uses a blend of volatility and momentum measurements, to signal the dominant market condition - trending or ranging.

Legend
The ๐’ฎ๐’ฑ๐น consists of a signal line that moves above and below a central zero line, serving as the indication of market regime.
  • When the signal line is positioned above zero, it indicates a period of elevated volatility. These periods are more profitable for trading, as an asset will experience larger price swings, and by design, trend-following indicators will give less false signals.
  • Conversely, when the signal line moves below zero, a low volatility or mean-reverting market regime dominates.

This distinction is critical for traders in order to align strategies with the prevailing market behaviors - leveraging trends in volatile markets and exercising caution or implementing mean-reversion systems in periods of lower volatility.

Case Study
Here we can see the indicator's unique edge in action.
  • Out of the four potential long entries seen on the chart - displayed via bar coloring, two would result in losses.
  • However, with the power of the ๐’ฎ๐’ฑ๐น a trader can effectively filter false signals by only entering momentum-trades when the signal line is above zero.
  • In this small sample of four trades, the ๐’ฎ๐’ฑ๐น increased the win rate from 50% to 100%


Methodology
The methodology behind the ๐’ฎ๐’ฑ๐น is based upon three components:
  1. By calculating and contrasting two ATRโ€™s, the immediate market momentum relative to the broader, established trend is calculated. The original method for this can be credited to the user @xinolia
  2. A modified and smoothed ADX indicator is calculated to further assess the strength and sustainability of trends.
  3. The โ€˜Linear Regression Dispersionโ€™ measures price deviations from a fitted regression line, adding further confluence to the signals representation of market conditions.

Together, these components synthesize a robust, balanced view of market conditions, enabling traders to help align strategies with the prevailing market environment, in order to potentially increase expected value and win rates.
Catatan Rilis:
Modified normalization logic.
Added 'Dynamic' capabilities.
Added 'Compressed Signal Mode'.
Catatan Rilis:
Updated Dynamic Function Library.
Update header name tag.
Catatan Rilis:
Added a Heikin Ashi volatility visualization - for faster measurements.
Added 'HA-Width' another experimental measure of volatility.


No statements or claims aim to be financial advice,
neither are any signals from us or our indicators.


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