DonovanWall

Relative Strength Volatility Variable Bands [DW]

This is an experimental adaptive trend following study inspired by Giorgos Siligardos's Reverse Engineering RSI and Tushar S. Chande's Variable Moving Average.

In this study, reverse engineered RSI levels are calculated and used to generate a volatility index for VMA calculation.

First, price levels are calculated for when RSI will equal 70 and 30. The difference between the levels is taken and normalized to create the volatility index.

Next, an initial VMA is calculated using the created volatility index. The moving average is an exponential calculation that adjusts the sampling length as volatility changes.

Then, upper and lower VMAs are calculated by taking a VMA of prices above and below the initial VMA. The midline is produced by taking the median of the upper and lower VMAs.

Lastly, the band levels are calculated by multiplying the distance from the midline to the upper and lower VMAs by 1, 2, 3, 4, and 5.

Bar colors are included. They're based on the midline trend and price action relative to the upper and lower VMAs.
Release Notes: Updates:

-> Migrated to v4.
-> Stability Fix: Added correction for NaN values to stabilize initial states.
-> Reorganized script structure
-> Updated style theme.
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 a publication is governed by House Rules. You can favorite it to use it on a chart.

Want to use this script on a chart?
For my full list of premium tools, check the blog:
https://wallanalytics.com/

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https://t.me/DonovanWall

Comments

what would be the rules to trade this?
For example: to trade pullbacks -> If midline depicts downtrend (red) we could short when price touches midline and exit when price touches the lower band? viceversa for uptrend.
What do you suggest? It'd be great to see a backtest strategy too!
Thanks in advance!
+3 Reply
DonovanWall Cryptorganics
@Cryptorganics, You can trade it however you want to. However, if you pay attention to the bar color scheme and midline color scheme, you can identify the momentary trend (red & maroon = bearish, lime & green = bullish) The best time to take advantage of price moves with this indicator that I've tried is when the trend confirmation changes from bullish to bearish or vice versa. Although it really depends on market conditions. Obviously the method I just explained performs best in trending markets. Ranging markets may be a different story depending on how wide or narrow the volatility is.

You could probably get decent results using only this tool if you have a good risk management strategy in place, but this is not a tool I've personally used as a standalone. Instead, I've mainly used it as a trend confirmation tool.
+4 Reply
martinweb DonovanWall
@DonovanWall, whats your personal favorite tools. your must haves? ;)
Reply
Thanks for sharing!!! Great work!!!
+2 Reply
https://ibb.co/6H7Lx53 Looks Great with S.box
+1 Reply
Nice works, keep it up bro =D
+1 Reply
Another great one :) I find this works well with 'Range Filter'. Takes a genius to create something like this... thank you for sharing your works.
Reply
Great work. Thank you
Reply