CM_Williams_Vix_Fix Finds Market Bottoms

The CM_Williams_Vix_Fix indicator identifies potential market bottoms by replicating the VIX (Volatility Index) methodology across any asset class, providing a quantitative measure of volatility-based exhaustion.

Usage

The Usage section describes how the script can be used to identify market reversal points. The indicator is primarily used to spot "panic" bottoms where price volatility reaches an extreme.

When the histogram changes color (typically to green), it indicates that the Williams Vix Fix (WVF) value has crossed above either the Bollinger Band upper limit or a high-percentile threshold. These spikes represent extreme fear and often coincide with price bottoms. While originally designed for Daily charts, the tool is effective on intraday timeframes for scalping or swing trading entries.

Users can use the "Show High Range" and "Show Standard Deviation Line" options to visualize the specific thresholds that trigger signals. For example, in a trending market, a user might look for the histogram to pierce the upper Bollinger Band as a signal that the current corrective move has reached a point of exhaustion.

Details

The CM_Williams_Vix_Fix is based on a calculation developed by Larry Williams to provide VIX-like readings for assets that do not have a dedicated volatility index. The formula calculates the percentage relationship between the highest close of a specified lookback period and the current bar's low. This creates an oscillator that rises as price drops sharply and falls as price stabilizes or rallies.

To improve the accuracy of these signals, the script incorporates two statistical filters:

1. Bollinger Bands: A standard deviation envelope is applied to the WVF values to detect moves that are statistically significant relative to recent volatility.
2. Percentile Lookback: A secondary filter calculates the highest WVF value over a long lookback period (e.g., 50 bars) and applies a multiplier to define a "high percentile" zone, helping to filter out minor fluctuations in favor of major market troughs.

Settings

• LookBack Period Standard Deviation High: Determines the number of bars used to find the highest close for the WVF calculation.
• Bollinger Band Length: Sets the period for the Simple Moving Average used in the Bollinger Band calculation.
• Bollinger Band Standard Deviation Up: Sets the multiplier for the upper Bollinger Band; higher values require more extreme volatility to trigger a signal.
• Look Back Period Percentile High: The lookback length used to determine the highest and lowest volatility levels for percentile filtering.
• Highest Percentile: A multiplier used to define the upper threshold for volatility peaks (e.g., 0.85).
• Lowest Percentile: A multiplier used to define the lower threshold for volatility troughs.
• Show High Range: Toggles the visibility of the percentile-based range lines on the chart.
• Show Standard Deviation Line: Toggles the visibility of the Bollinger Band upper limit.

FAQ

What asset classes can this indicator be used on? Unlike the traditional VIX which is limited to stock indices, this indicator can be applied to any asset class, including equities, forex, crypto, and commodities.

Which timeframes are most effective for finding bottoms? The indicator was originally designed for Daily charts to find significant macro bottoms, but it functions effectively on lower timeframes to identify local exhaustion points.

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