Range Coefficient for Comparing Recent and Long-Term Volatility

Summary

The Range Coefficient is a histogram indicator that compares a short-term average of candle ranges with a longer-term average. It computes the ratio of the recent average range to the longer average range, then subtracts one. Positive readings mean recent ranges exceed the longer-period average; readings at or below zero indicate recent ranges are no larger. The example settings use short and long periods of five and one hundred bars, respectively, with a configurable averaging method.

The author interprets a rising coefficient crossing above zero as a possible sign of increasing volatility, and a falling coefficient below zero as a possible sign of decreasing volatility. The note also suggests comparing market moves during high- and low-coefficient periods, but supplies no empirical results or rules for doing so. The indicator measures relative candle range and may help describe volatility regimes; its predictive interpretation is a hypothesis, not evidence of forecast accuracy, and the document does not specify trading entries, exits, or risk controls.

Key ideas

• The indicator compares a short-period average candle range with a longer-period average range.
• Positive readings indicate recent ranges are larger than the long-term reference, while nonpositive readings indicate they are no larger.
• The author treats upward crossings above zero as a possible signal of rising volatility and declining values below zero as a possible sign of easing volatility.
• The document gives no empirical validation or complete trading rules for using the indicator.

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