Asymmetric Volatility Trend Line [QuantAlgo]

🟢 Overview

Asymmetric Volatility Trend Line is a trend-following indicator built on adaptive standard deviation thresholds rather than fixed bands or moving average crossovers. It quantifies the statistical volatility of recent price movement to determine asymmetric conditions for trend continuation versus trend reversal, then uses those conditions to anchor a dynamic trend line that adjusts position in response to confirmed directional moves, helping traders distinguish between genuine breakouts and noise-driven fluctuations across every timeframe and market.

🟢 How It Works

The foundation of the indicator is a rolling standard deviation applied to the selected price source over a configurable lookback window, scaled by a threshold multiplier to produce the volatility boundary used in all trend logic:

vol_threshold = ta.stdev(src, lookback) * threshold_mult

This threshold is intentionally asymmetric in application. When the trend line is in a bullish state, a smaller fraction of the threshold (0.5x) is required for price to confirm continuation, while a full threshold breach in the opposite direction is needed to trigger a reversal. The same asymmetry applies in reverse during bearish states:

if trend_dir >= 0
    if src > trend_line + vol_threshold * 0.5
        trend_line := math.max(trend_line, src - vol_threshold * 0.25)
        trend_dir  := 1
    else if src < trend_line - vol_threshold
        trend_line := src + vol_threshold * 0.25
        trend_dir  := -1

This design means continuation requires less evidence than reversal. A directional move only needs to exceed half the volatility threshold to sustain the current trend, but must overcome the full threshold to flip it. The 0.25x offset applied when repositioning the trend line keeps it anchored within the volatility envelope rather than jumping directly to price, producing a smoother line that does not overreact to a single bar.

When a reversal is confirmed, the trend line is placed on the opposite side of price at a quarter-threshold distance, giving it room to develop without immediately triggering another flip:

trend_line := src + vol_threshold * 0.25  // repositioned on bearish flip
trend_dir  := -1

Direction state is tracked through two integer variables, with reversal conditions derived from comparing the current and prior bar states:

turned_bullish = trend_dir == 1  and trend_dir[1] == -1
turned_bearish = trend_dir == -1 and trend_dir[1] == 1
is_reversal    = trend_dir != prev_dir and bar_index > 0

🟢 Signal Interpretation

▶ Bullish Trend (Green): When price closes above the trend line by more than half the volatility threshold, the indicator enters bullish mode with green colouring applied across the trend line, gradient fill, and reversal marker (⦿). This state persists until price closes below the trend line by the full volatility threshold, allowing normal pullbacks to occur without triggering a direction change.

▶ Bearish Trend (Red): When price closes below the trend line by more than half the volatility threshold, the indicator enters bearish mode with red colouring across all visual elements. A full threshold breach to the upside is required to exit this bearish state.

🟢 Features

▶ Preconfigured Presets: Three parameter sets cover different trading approaches. "Default" targets swing trading on 4-hour and daily charts with moderate threshold sensitivity. "Fast Response" reduces the volatility barrier and shortens the lookback for intraday charts where the indicator needs to adapt to shorter-duration moves. "Smooth Trend" raises the reversal threshold substantially for position trading on daily and weekly timeframes, where the cost of a false flip is higher than the cost of a delayed one. Selecting a preset overrides the individual multiplier and lookback inputs.

▶ Built-in Alerts: Three alert conditions cover all directional states. "Bullish Trend Signal" fires on the bar where the trend direction flips from bearish to bullish. "Bearish Trend Signal" fires on the bar where it flips from bullish to bearish. "Any Trend Change" combines both into a single condition for traders who want a unified notification regardless of direction.

▶ Visual Customisation: Six colour presets (Classic, Aqua, Cosmic, Cyber, Neon, and Custom) apply coordinated bullish and bearish colour schemes across the trend line, gradient fill, reversal markers, and optional bar and background colouring. Bar colouring tints price candles with the active trend colour at a configurable transparency level, and background colouring extends the directional tint across the full chart pane. Both are disabled by default and controlled independently.