Volatility Switch

What is the Volatility Switch?

The Volatility Switch is a bounded volatility-regime gauge proposed by Ron McEwan (Technical Analysis of Stocks & Commodities, 2013). It measures short-horizon volatility from one-bar relative price changes, then expresses the current value as a percentile rank within its own trailing history. The output therefore lives between 0 and 1 on any instrument: readings above 0.5 mean volatility is elevated relative to its recent past, readings below 0.5 mean it is subdued.

The bounded scale is the point. In the common reading, high values mark regimes where price action turns choppy and mean-reverting tactics have the stronger claim, while low values mark quiet conditions in which trends are more likely to persist. That makes the switch a compact form of volatility regime classification: one normalized line that routes strategy selection. Like any regime filter it is backward-looking, lags at transitions, and says nothing about direction.

How traders use it

• As a strategy router, the use McEwan proposed: run mean-reversion logic while the switch reads above 0.5 and trend-following logic below it, rather than trading the line as a signal in itself.
• As a gate on signal type: some systems only honor breakout and momentum entries while the switch sits in the low-volatility half of its range, on the logic that elevated readings mark conditions where follow-through is less reliable.
• As a quiet-market flag: extended stretches near the bottom of the scale mark compression, the setup condition range expansion traders watch for, though the switch says nothing about when the expansion comes or in which direction.