1990issue C081-4
Constructing a two-line relative volatility index
Start from the close-only rate-of-change pane that was the charting module's original study, then rebuild the same chart around a relative volatility index. The index splits historical volatility into two lookback sums of unsigned travel above and below the prior close, and that spread can be restated as a 0-to-100 oscillator.
- Rate of change was the charting module's original indicator study and remains the close-based control signal on the same menu.
- The relative volatility index keeps two running sums of equal lookback length: unsigned high-to-prior-close travel and unsigned low-to-prior-close travel.
- The higher line is the indicated direction and the historical-volatility regime reading; the spread can be rewritten as a percent volatility oscillator from 0 to 100.
- Editorial view: the archive is showing two displays of one ordered price series, a crossing pair or a single oscillator, not a trading rule.
A close-only control pane
The charting module under discussion originally exposed rate of change as its only indicator study. That close-based pane is the comparison signal for what follows. It is not rewritten into the volatility split.
The volatility study is attached to the same chart-command switch and menu that already launch rate of change. The workflow therefore holds two readings of one ordered price series, not two separate research problems.
Two running sums from the same session
Each session adds the unsigned distance from that day's high to the previous close into one running sum of user-chosen lookback length. The unsigned distance from that day's low to the previous close goes into a matching running sum.
Those two running sums are plotted as the up and down lines. The lines cross when the indicated market direction changes. The line that stands above the other is treated as the indicated direction.
A regime pair or a single oscillator
Which line stands higher is the historical-volatility reading. It describes how recent realized range sat above versus below the prior close.
The spread between the two lines can be rewritten as a percent volatility oscillator scaled from 0 to 100. The underlying lookback sums stay the same. Only the display changes from a crossing pair to a single scaled line.
Range inputs instead of closes alone
The construction is presented as a more sensitive trend reading than close-only indicators because it uses the intra-day range above and below the previous close.
The paired lines are described as visually similar to plus and minus directional movement even though the formulas differ. Similarity of appearance is not identity of method. Rate of change stays the close-based baseline on the same chart.
All readings on this track · 7 readings
- 1990Constructing a two-line relative volatility index
- 1993A volatility-direction filter for dual moving-average crossovers
- 1995Constructing the relative volatility index and inertia
- 1995Constructing a high-low relative volatility trend filter
- 2005Genetic optimization of relative-volatility crossover rules
- 2017How lookbacks, sign, and bands construct a volatility oscillator
- 2017Building a signed relative-volatility oscillator