Garman & Klass Estimator Historical Volatility Bands

The Garman & Klass Estimator Historical Volatility Bands indicator provides a dynamic volatility-based envelope around price by utilizing the Garman-Klass volatility estimator for high-precision band calculations.

Usage

The indicator can be used to identify potential breakouts, overextended price conditions, and trend direction. The bands react to market volatility more efficiently than standard historical volatility models by incorporating intraday price extremes.

• Trend Identification: The middle line changes color based on the slope and relationship of the upper and lower bands. A green line suggests bullish momentum, while a red line suggests bearish momentum.
• Volatility Expansion: Widening bands indicate increasing market volatility, while narrowing bands suggest consolidation.
• Signal Generation: The tool includes built-in signals and bar coloring to highlight potential entry or exit points based on price interactions with the volatility bands.

Details

The Garman-Klass estimator is a volatility measurement that incorporates the open, high, low, and close prices. It assumes a geometric Brownian motion and is approximately 7.4 times more efficient than simple close-to-close estimators. By extending Parkinson’s volatility to include opening and closing prices, it captures the most active parts of the trading session more accurately.

The middle line is calculated using a selectable moving average (e.g., HMA, SMA, EMA), and the bands are projected from this baseline using the Garman-Klass calculation multiplied by a user-defined deviation.

Settings

Source Settings

• Heiken-Ashi Better Smoothing: Selects the smoothing method (AMA, T3, or Kaufman) for specific source types.
• Source: Provides a wide array of price inputs including standard OHLC, Heikin-Ashi variants, and smoothed "Better" sources.

Basic Settings

• Period: The lookback period for both the moving average and the Garman-Klass calculation.
• Double Smoothing MA Type: Choose from 11 different moving average types (HMA, EMA, LSMA, etc.) for the middle line.
• Deviations: Adjusts the width of the bands relative to the volatility estimate.

UI Options

• Color bars?: Toggles price bar coloring based on indicator state.
• Show signals?: Enables or disables on-chart visual signals.

Moving Average Inputs

• Kaufman/AMA Parameters: Specific fine-tuning inputs for the adaptive moving average types used in the source calculations.

FAQ

How do I access Garman & Klass Estimator Historical Volatility Bands?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.

Why does the middle line change to white?

The middle line color is determined by the alignment of the bands. If the upper and lower bands do not share the same directional color state, the middle line defaults to a neutral white.

Is Garman-Klass better than standard Historical Volatility?

Garman-Klass is generally considered more efficient because it accounts for intraday price extremums (highs and lows) rather than just the closing prices, offering a more comprehensive view of price dispersion.