Relative Volatility Index Signals from Smoothed Upside and Downside Volatility

Summary

The strategy adapts the RSI framework to compare volatility on rising and falling closes. It calculates closing-price standard deviation over a configurable period, assigns that value to the upside or downside series according to the close-to-close move, smooths both series, and forms an index scaled from zero to one hundred. Crossing configurable lower and upper zones sets short or long exposure; an optional setting reverses those directions.

The document supplies default zones and a short BTC futures backtest configuration, but gives no performance figures or comparison benchmark. It presents the approach as a simple trend-following signal and suggests combining it with other indicators, adding stops, and adjusting exposure. Its own caveats include false signals, reliance on closing prices rather than intraday movement, sensitivity to parameters, and transaction costs. The backtest description alone does not establish that the method is profitable or robust across markets.

Key ideas

• The indicator uses closing-price standard deviation to represent volatility direction.
• Smoothed volatility from up closes and down closes is combined into a normalized index.
• The strategy takes short or long exposure when the index crosses configurable lower or upper zones.
• An optional reverse mode swaps the direction of those signals.
• The document gives backtest settings but no numerical performance evidence, and notes signal, parameter, and cost risks.

Tags

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