Roger & Satchell Estimator Historical Volatility Bands

The Roger & Satchell Estimator Historical Volatility Bands indicator provides a volatility-based envelope around price using a specialized estimator that accounts for price trends and intraday observations. By utilizing the Rogers-Satchell calculation for historical volatility, this tool offers a more nuanced view of market dispersion than standard deviation-based bands, particularly when price evolution is driven by strong trends.

Usage

The indicator can be used to identify potential trend shifts and volatility-driven price extremes.

• Trend Identification: The middle line changes color based on the relationship between the upper and lower bands. When both bands are rising, the environment is typically bullish; when both are falling, it is typically bearish.
• Volatility Extremes: Prices reaching or exceeding the outer bands may indicate overextended market conditions relative to recent historical volatility.
• Signal Integration: Users can enable on-chart signals and bar coloring to visually confirm when specific volatility thresholds or directional shifts occur.

Details

The Rogers–Satchell estimator (RSEHV) is designed to capture the volatility portion attributable to price trends. Unlike some other estimators, it handles the frequency of price observations within its model to overcome specific drawbacks of simpler volatility measures. The mathematical foundation uses the relationship between High, Low, Open, and Close prices: RSEHV = sqrt((1/n) * sum((log(high/close)*log(high/open)) + (log(low/close)*log(low/open))))

The bands are constructed by taking a chosen Moving Average as the baseline and adding/subtracting the RSEHV value multiplied by a deviation factor.

Settings

Source Settings

• Heiken-Ashi Better Smoothing: Selects the smoothing type (AMA, T3, or Kaufman) for specific source types.
• Source: Provides a wide array of price inputs, including standard prices, Heiken-Ashi, and expanded trend-biased sources.

Basic Settings

• Period: The lookback window for calculating historical volatility and the moving average.
• Deviations: The multiplier applied to the volatility calculation to widen or narrow the bands.

Bands Settings

• Double Smoothing MA Type: Choose the moving average type used for the middle line (e.g., HMA, EMA, SMA, VWMA, etc.).

UI Options

• Color bars?: Enables or disables bar coloring based on the indicator's directional bias.
• Show signals?: Toggles visual buy/sell signals on the chart.

Moving Average Inputs

• Kaufman's / Adaptive MA Inputs: Specific parameters for fine-tuning the adaptive moving average components if selected as the source smoothing type.

FAQ

How do I interpret the color changes on the middle line?

The middle line uses three colors: it matches the band color when both upper and lower bands are trending in the same direction and turns neutral (white) when they diverge.

What makes the Rogers-Satchell estimator different from standard Bollinger Bands?

While standard bands use standard deviation, Rogers-Satchell focuses on the relationship between high/low and open/close, making it more sensitive to trend-driven volatility.

How can I access this tool?

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