Relative Volatility Oscillator with Adaptive Thresholds
Summary
The Relative Volatility Intelligent Index (RVII) compares volatility on rising and falling bars. It assigns each bar’s standard deviation to an upward or downward stream according to the close’s direction, smooths both streams with Wilder averages, and converts their ratio into a 0–100 oscillator. A further exponential average smooths the result; 50 is neutral, with higher readings indicating greater upward volatility and lower readings greater downward volatility.
The indicator can use adaptive thresholds derived from its recent range or fixed levels, and offers slope, midpoint-cross, and threshold-cross coloring modes. The document suggests using threshold crossings as a trend filter, midpoint crossings as confirmation, or slope changes for quicker but noisier signals. It provides formulas, parameter descriptions, and implementation code, but no backtest or empirical performance results. Its directional interpretation and suggested trade uses are therefore guidance to evaluate, not demonstrated predictive evidence.
Key ideas
- The indicator separates standard deviation into upward and downward volatility streams based on close-to-close direction.
- Wilder averages and a final exponential average smooth the volatility ratio.
- Readings above or below 50 indicate which directional volatility stream dominates.
- Adaptive thresholds scale to the recent oscillator range, while fixed levels are also available.
- Slope, midpoint, and threshold modes trade responsiveness for selectivity in different ways.
- The document provides no backtest evidence that the suggested signals are profitable.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.