Ratio OCHL Averager - An Alternative to VWAP

The Ratio OCHL Averager indicator provides a non-parametric alternative to the Volume Weighted Average Price (VWAP) by utilizing the ratio of the Open-Close range relative to the monthly High-Low range to determine the smoothing factor of an exponential average.

Usage

The Usage section describes how the script can be used to identify trend direction and potential support or resistance levels without the need for traditional length-based period optimization. Because the smoothing factor is derived from price action volatility relative to a higher timeframe anchor (monthly high/low), the indicator adapts its reactivity based on market movement.

• Trend Identification: When the price is trading above the Ratio OCHL Averager, it indicates a bullish bias. Conversely, trading below suggests a bearish bias.
• Reactivity: Using higher timeframes typically results in a more reactive output, though the indicator is designed to remain smoother than a standard VWAP to avoid excessive noise.
• Crossovers: Traders may look for price crossovers as potential signals for trend changes.

Details

The Ratio OCHL Averager is built on the concept of an adaptive exponential moving average. Unlike VWAP, which relies on volume, this tool calculates a smoothing coefficient ($b$) by dividing the absolute difference between the close and the reference open by the monthly high-low range ($H - L$).

The result is a non-parametric indicator that adjusts its speed based on price intensity. If the Open-Close range is large relative to the monthly volatility, the indicator becomes more reactive. If the range is small, the indicator becomes smoother.

Settings

• Recursive: Determines the reference point for the calculation. When disabled, the indicator uses the current bar's open price. When enabled, it uses its own previous output ($d[1]$) as the reference, resulting in a more reactive estimation that tracks price action more closely.

FAQ

How do I use the Recursive setting?

The Recursive setting changes the calculation basis from the open price to the previous value of the indicator. Enabling this typically increases the reactivity of the tool, making it follow price trends more aggressively.

Why does the indicator look different on various timeframes?

The indicator utilizes monthly high and low values (via request.security) to establish a volatility range. Because this range is fixed to a monthly resolution, the relative impact of individual bars changes depending on whether you are viewing a 5-minute or a Daily chart.

How can I access Ratio OCHL Averager?

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