Volatility Percentile (H-LINES)

A simple script that adjusts the Volatility Percentile Indicator visibly in order to better accommodate entries/exits and certain trading setups/strategies.


TL;DR - Remember after a full reset, we are looking for initial crosses UP on the UpperSwingline and crosses DOWN on the LowerSwingline for primary and secondary signal derivation.

Vice versa also works great but the prior method mentioned is a little more consistent in my experience, but you should mess around and optimise this for your own setups and strategies anyway.



^Click image for a redirect to that script.

ALL CREDIT GOES TO: https://www.tradingview.com/u/HeWhoMustNotBeNamed/

He wrote everything so give credit where it's due, good bit of kit this here script is.



First of all, the alterations I've made seem only to be consistently viable with renko charts though if you can get the sought after results using candles or any other chart type then perfect, but be wary. All my back-testing done only with LinReg, HMA and SWMA - ATR type settings exclusively on renko charts. The changes I've made to the original script essentially just turns it visibly into an oscillator and uses a couple horizontal lines to generate signals, very simple - absolutely nothing has changed in the actual code of calculating this indicator.

What I believe my adjustments have achieved is quite simple. A full reset/oscillation on the indicator tries to map the strongest parts of a move or at least the part of the move where volume and the rate of transactions is at its peak to even facilitate said move. *take this statement with a pinch of salt though I do believe it's interacting with accumulation/distribution patterns, which is expected of volatility*

For ease of communication let's refer to the area between the the first UpperSwingline cross to the subsequent LowerSwingline cross, as the primary move. Then afterwards when it crosses the UpperSwingline again to make the full reset, the area in between those two points referred to as the secondary move.

Though more interestingly/practically the indicator ends up giving you two signals. In order for this to work we have to first decide that a spike up in volatility which crosses the UpperSwingline implies a significant level of interest at that price level. Usually that means a reversal is brewing, if price has already moved, trended and is approaching a certain area of value; which causes a spike of new positions to be taken, then you know that this is a level where contrarians are looking to enter. Now here's the tricky part, when volatility crosses the LowerSwingline price action becomes a little more open for interpretation, the way I personally like to look at this secondary signal is the potential for an exhaustion period to prolong itself a little longer. I know that's not the perfect analysis for what's going on, a more in-depth look into what's going on would best be described using Elliott Wave Theory, if a cross on the UpperSwingline near a significant area of value gives us a reversal trade lets just assume for the sake of argument that a new Elliott Wave can begin forming here. Making the move from that initial UpperSwngline cross to the cross on the LowerSwingline, the area that encompasses those two points: the impulse wave. After this point my analogy kind of falls apart and sadly my knowledge just isn't what it needs to be in order for me to properly analyse what's going on here but I must digress. Price after crossing the LowerSwingline up until the point where it makes a full reset by crossing the UpperSwingline again, within this area price seems to do either one of two things:

  • Situation 1 - Most likely occurs after a major trend reversal from major support/resistance or area of value (price has trended to new territory, maybe spent time a little time consolidating but hasn't broken the key level, momentum shifts, price action breaks current structure and you get the signal that primary move is a reversal) = Exhaustion Period, price will continue in direction of primary move during the secondary move. This here is for our trend-followers, you wanna take a continuation trade? Just wait for the pullback/rally to hit a FiB retracement level and enter - or any other means to find a decent support/resistance to enter.

  • Situation 2 - Most likely occurs when market enters a range or consolidation (price was previously seen as being at either a discount or premium so Situation 1 could have already played out and now you're looking at a full reset after that, imagine this spot to be the centre line of a linear regression channel or bang in the middle of your range, could even occur if price breaks a key moving average and decides it ought to consolidate around it for a while. Basically at any point where a somewhat prolonged consolidation is expected and not a quick reversal) = Corrective Wave, price will move against the direction of primary move during the secondary move. Now you might be expecting me to say this ones for you reversal traders but not really, if this is occurring then there probably isn't a definitive direction the market has chosen so you can use this opportunity to take range trades in the direction or against the direction of whatever the current trend or latest trend was depending on whatever slight bias you may have. <--- Situation 2 is very useful for finding cleaner entries if you do have a trend bias, say price underwent Situation 1, is now at key moving average but your bias is that it will break and continue up, so you wait and allow the secondary move of Situation 2 to take your entry to a much better R:R before entering a position.


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.


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