Trend Volatility Index (TVI)

The Trend Volatility Index (TVI) indicator is a robust nonparametric oscillator designed to measure the strength and emergence of price trends by quantifying structural volatility using U-statistics. It provides traders with an objective gauge of trend expansion and range-bound market states, aligned directly with the price tick scale.

Usage

The TVI can be used to identify shifts in market regime by observing the expansion or contraction of its values. Because the indicator is plotted using a candlestick-style format, users can interpret the "price action" of the volatility itself.

• Trend Breakouts: An expansion in the TVI candles suggests a volatility breakout, indicating that a trend is gaining momentum.
• Range Identification: Low, flat TVI values signify a range-bound market where structural volatility is minimal.
• Early Reversals: Changes in the TVI candle color (Bullish/Green or Bearish/Red) can signal early shifts in trend behavior.
• Volatility Benchmarking: The indicator includes an ATR area plot and a High-Low Range MA, allowing users to compare the current structural trend volatility against standard volatility metrics.

Details

The indicator calculates a nonparametric dispersion metric known as the Gini mean difference. This is achieved by computing the average absolute difference between multiple Simple Moving Averages (SMAs) of varying lengths (ranging approximately from 8 to 65 periods).

Unlike standard oscillators that are often normalized between 0 and 100, the TVI shares the same dimension as price ticks. This allows for a more "unbiased" and "robust" estimation of volatility that isn't distorted by fixed boundaries. The use of U-statistics ensures that the metric remains resistant to outliers compared to traditional variance-based measures.

Settings

• Base Price: Determines the source price used for the internal SMA calculations.
• Step Factor: Rounds the output to the nearest price step. Users can use the instrument's tick size as a guide for smoother or more granular steps.
• Mode: Toggle between 'Candle' and 'Heikin-Ashi' for the indicator's main plot.
• Color Mode: Determines the logic used for coloring the candles. Note that Heikin-Ashi mode may introduce a slight lag in color change detection.
• ATR Length: Sets the period for the background ATR area plot.
• Range Length: Sets the period for the High-Low Range moving average area plot.

FAQ

How do I access the Trend Volatility Index (TVI)?

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

Does the TVI predict future price levels?

No, the TVI is a structural indicator designed to quantify current trend volatility and dispersion; it does not forecast specific future price targets.

Why does the indicator use SMAs of different lengths?

By comparing multiple SMAs, the indicator captures the "spread" between various trend cycles. When these SMAs diverge significantly, the Gini mean difference increases, signaling higher trend volatility.