Adaptive Volatility Trend

The Adaptive Volatility Trend indicator is a trend-following tool that dynamically adjusts its sensitivity to market conditions using the Kaufman Efficiency Ratio and ATR-based volatility bands. It aims to accelerate during strong directional moves and slow down during choppy price action to reduce whipsaws and false signals.

Usage

The Adaptive Volatility Trend can be used to identify current market regimes and potential entry points. The indicator features a color-coded trend line (Green for bullish, Red for bearish, Yellow for neutral) and volatility-adjusted bands that act as support and resistance zones.

Signals are generated based on trend flips confirmed by price action, momentum, and volume filters:

• BUY Signals: Appear as green triangles below the bars when a bullish trend flip is confirmed, price is above the adaptive line, and the composite score meets the user-defined threshold.
• SELL Signals: Appear as red triangles above the bars when a bearish trend flip occurs and the setup meets the scoring criteria.

Users can select from four built-in presets:

• Conservative: High reliability for swing trading (4H–Daily).
• Default: Balanced performance for most timeframes.
• Aggressive: Faster response for intermediate timeframes (15min–1H).
• Scalping: Optimized for high-frequency setups (1–5min).

Details

The core innovation of the tool is a self-tuning mechanism built on three adaptive layers:

• Efficiency Ratio (ER) Engine: Uses the Kaufman Efficiency Ratio to measure trend efficiency. An ER near 1.0 indicates a clean trend, while an ER near 0.0 indicates noise. The tool blends between fast and slow EMA speeds based on this ratio.
• ER-Scaled ATR Bands: Instead of static multipliers, the volatility bands contract when the trend is clean (high ER) and expand during noisy markets (low ER) to filter out false breakouts.
• Composite Signal Scoring: Every signal is assigned a quality score (0–100) based on trend strength (40%), momentum via RSI distance (30%), and relative volume (30%).

Settings

Main Settings

• Source: The price source for calculations (e.g., Close, HL2).
• Trend Length: The lookback period for the adaptive trend filter.
• ATR Length: The period used for calculating volatility bands.
• Band Multiplier: The multiplier determining the width of the ATR channel.
• Preset: Quick selection of pre-configured parameters for different trading styles.

Filters

• RSI Momentum Filter: Blocks buy signals when overbought or sell signals when oversold.
• Volume Filter: Requires volume to be above a specific moving average threshold (automatically disabled on assets without volume data like Forex).

Advanced

• Min Signal Score: The minimum score required for a signal to be displayed on the chart.
• Efficiency Smoothing: Determines the smoothing applied to the Kaufman Efficiency Ratio.

FAQ

How do I interpret the Signal Score?

The score represents the conviction behind a signal based on trend, momentum, and volume. A score of 70–100 indicates high conviction, while scores below your threshold are filtered out to prevent low-probability trades.

Does this indicator repaint?

No, the indicator is fully anti-repaint compliant. All signals are confirmed on the close of the bar (barstate.isconfirmed) and will not change on historical data.

How can I access the Adaptive Volatility Trend?

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