Wave-PM Volatility Cycles Across Multiple Lookbacks
Summary
The Wave-PM indicator estimates volatility across 30 lookback periods and displays the readings as a colored heatmap or as lines. It calculates each reading from the standard deviation of closing prices, scaled against a 100-bar smoothed measure of squared, point-value-adjusted deviation, then maps the normalized result through a bounded exponential transform.
The author presents the colors as a way to interpret volatility phases: blue and green suggest subdued or building volatility, while orange and red mark elevated readings that may precede larger moves. Thresholds label regions such as consolidation, breakout, and danger. The script offers full heatmap, simplified heatmap, and line views, with adjustable starting period and spacing between lookbacks. The document provides the calculation and interpretation, but no performance study or evidence that the color transitions predict future moves. Its “pent-up energy” reading is therefore a hypothesis for chart analysis, not a demonstrated trading signal; the indicator is also described as computationally demanding.
Key ideas
- The indicator computes a normalized volatility reading from closing-price standard deviation and a smoothed scale estimate.
- It repeats the calculation across 30 lookback periods to show volatility at multiple horizons.
- Heatmap colors map readings to zones associated with consolidation, gear changes, breakouts, and elevated risk.
- The author interprets cool colors as possible stored volatility and warm colors as larger moves, without supplying predictive validation.
- Users can adjust the starting lookback, period spacing, and visualization mode.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.