Volatility-Adaptive Trend Regimes from Correlation Oscillators

Summary

This indicator classifies trend direction using one of two price-versus-time correlation oscillators, selected according to a volatility regime. It estimates current volatility from the standard deviation of returns, smooths that measure, and compares it with two levels calculated from a rolling history. The levels come from splitting the volatility observations around their median and averaging the lower and upper groups; they are periodically refit and smoothed. High volatility selects the shorter, faster oscillator, while low volatility selects the longer, slower one.

The selected correlation is scaled to a zero-to-one range: readings above the midpoint indicate a bullish regime and those below indicate a bearish regime. The display includes oscillator lines, regime shading, and markers for shifts. The script describes an adaptive classification method but provides no performance study or trading rules for entries and exits. Its classifications depend on lookback, smoothing, and refit settings; they may lag or fluctuate as volatility changes, and plotted shift markers are offset for display. Treat the output as a market-state input requiring independent validation.

Key ideas

• The method estimates volatility from return standard deviation and separates observations into lower and upper groups around their median.
• It selects a longer correlation oscillator in low volatility and a shorter one in high volatility.
• The selected oscillator’s midpoint determines whether the displayed trend regime is bullish or bearish.
• Volatility levels are periodically recalculated and smoothed, which can make regime changes slower.
• The indicator classifies market state but does not establish profitable entries or exits.

Tags

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