OHLC Volatility Estimators

The OHLC Volatility Estimators indicator provides a comprehensive collection of volatility measurement models, allowing traders to visualize and compare different historical volatility calculation methods alongside external implied volatility data.

Usage

This tool can be used to gauge the market's realized volatility using various mathematical frameworks. By comparing different models, such as the standard Close-to-Close method against the Yang-Zhang or Rogers-Satchell methods, users can identify periods where price action is behaving erratically or trending smoothly.

Traders often use these estimators to:

• Identify Trending Markets: Use the Rogers-Satchell model, which is optimized for markets with drift (trends).
• Assess Gap Impact: Compare Yang-Zhang (which accounts for opening gaps) with other models to see how much volatility is being generated outside of trading hours.
• Benchmark Implied Volatility: Compare the calculated historical volatility against an external ticker (like the VIX) to identify if the current asset is overperforming or underperforming the broader market's expected volatility.

Details

The script implements several classic and advanced volatility models:

• Close-to-Close: The standard historical volatility based on the standard deviation of logarithmic returns.
• EWMA (Elastic Weighted Moving Average): Also known as Exponential Historical Volatility, this model places more weight on recent price movements, similar to the RiskMetrics approach.
• Parkinson's: A High-Low range estimator that assumes a random walk process.
• Rogers-Satchell: An estimator designed to handle price series with drift, making it more accurate for trending assets, though it does not account for price gaps.
• Yang-Zhang: A highly efficient estimator that combines multiple components to stay independent of drift and opening gaps.
• Logarithmic Garman-Klass: A metric combining overnight, high/low, and open/close ranges for a more complete picture of daily price action.

Settings

Main Settings

• Volatility Lookback Window: The number of bars used to calculate the variance and standard deviation for the estimators.
• Resolution: The timeframe on which the calculations are performed.
• Compound at 'N' Periods: The number of periods used for annualization or compounding (e.g., 252 for daily charts representing trading days in a year).
• External Volatility Symbol: The ticker used for comparison (e.g., INDEX:VIX).
• External Symbol Mode: Determines which specific volatility model or raw value to plot for the external symbol.

FAQ

How do I access OHLC Volatility Estimators?

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

Which model is the most accurate?

Accuracy depends on the market condition; for example, Yang-Zhang is generally considered the most efficient for assets with frequent gaps, while Rogers-Satchell is better for trending markets.

What does the "Log EWMA-YZ Avg" line represent?

It is a composite indicator that averages the Logarithmic EWMA and Yang-Zhang values to provide a smoothed, balanced view of volatility that accounts for both recent price shocks and opening gaps.