Classifying Directional Phases with Volatility and Amplitude

Summary

The Dynamic Indicator compares estimated price volatility with directional movement amplitude to classify market phases. It constructs fast and slower range estimates, combines them into a trend reference and upper and lower ranges, then measures how far price has moved relative to that reference. When amplitude exceeds the volatility threshold, the display marks a more dynamic phase in green; when amplitude is lower, it marks a less dynamic phase in red. The author recommends viewing the indicator on three timeframes and allows the volatility scaling parameter to be adjusted.

The supplied formula describes the calculations, but the document offers no backtest, market examples with measured outcomes, or evidence that the colors improve returns. The recommendation to avoid opportunities during non-directional phases is the author’s interpretation, not a validated rule. The method’s signals may depend on timeframe and parameter choices, and the article does not specify entry, exit, or risk controls.

Key ideas

• The indicator estimates volatility from price ranges and compares it with directional movement amplitude.
• Green marks indicate amplitude above the volatility threshold, while red marks indicate a less dynamic phase.
• The calculation combines fast and slower range estimates around a trend reference.
• The author recommends examining the indicator on three timeframes and permits adjustment of the volatility parameter.
• No backtest or performance evidence is supplied, and trading entries and risk controls are unspecified.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.