Indicator: Custom COG channel

The COG Double Channel indicator provides a sophisticated technical analysis framework by combining Center of Gravity (COG) baselines with dual-layered volatility bands to identify trend direction and potential market breakouts. By utilizing both Standard Deviation and Average True Range (ATR) calculations, this tool offers a more reactive and comprehensive view of price action than traditional moving average-based envelopes.

Usage

The Usage section focuses on interpreting the interaction between the two sets of bands and the central baseline. Traders use this tool to determine trend strength, mean reversion points, and volatility expansion.

• Baseline Tracking: The central line uses a linear regression-based Center of Gravity approach. When price is trading above this line, the short-term bias is bullish; below it, the bias is bearish.
• Band Interaction: The indicator plots two sets of bands. The dashed lines represent Standard Deviation (Bollinger-style) bounds, while the circled lines represent ATR-based (STARC-style) bounds.
• Volatility Squeezes: A "Squeeze" occurs when the Standard Deviation bands (volatility) contract within the ATR bands. These periods are marked on the chart with teal crosses. A squeeze typically precedes a significant directional move, indicating a period of market consolidation before a breakout.

Details

The script is constructed using a refactored logic based on the original work by LazyBear. Unlike standard channels that use Simple Moving Averages, this version utilizes ta.linreg to establish a "Center of Gravity" that tracks price changes with less lag.

The tool simultaneously calculates:

1. Standard Deviation Bands: Calculated by applying a user-defined multiplier to the standard deviation of the price over a specific length.
2. ATR Bands: Calculated using a custom True Range function and a Simple Moving Average to create volatility-adjusted boundaries.

The "Squeeze" logic is a critical component of the execution. It identifies specific market conditions where historical volatility (Standard Deviation) is lower than the average volatility (ATR), suggesting an imminent return to higher volatility.

Settings

• Length: (Default: 34) Determines the lookback period for both the Linear Regression baseline and the volatility calculations (ATR and Standard Deviation).
• Multiplier: (Default: 2.5) Adjusts the width of the Standard Deviation bands. Increasing this value makes the bands wider, while decreasing it makes them tighter to the price action.

FAQ

How do I interpret the teal crosses on the chart? The teal crosses indicate a "Squeeze" state, where market volatility has contracted significantly. Traders often look for a price breakout following the disappearance of these crosses to signal the start of a new trend.

What makes the COG baseline different from a standard Moving Average? The Center of Gravity baseline uses linear regression, which aims to find the "best fit" line for price action over the specified length. This often results in a baseline that is more responsive to price shifts than a standard SMA or EMA.

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