Volatility Hull Ribbon

The Volatility Hull Ribbon indicator is a trend-following overlay that utilizes volatility-weighted moving averages to provide a responsive and smooth estimate of market direction. By weighting price action based on True Range rather than standard volume or time, it ensures that high-energy moves have a greater impact on the trend calculation, helping traders identify momentum-backed shifts.

Usage

The Volatility Hull Ribbon can be used as a primary trend filter or a regime identification tool. When the ribbon or line is colored bullishly (green), market pressure is rising; conversely, a bearish color (red) indicates falling pressure.

• Trend Bias: Traders can use the slope and color of the VWHMA to determine their trading bias—favoring longs when the slope is positive and shorts when it is negative.
• Ribbon Dynamics: Enabling the "Plot as Band?" feature creates a displacement ribbon. An expanding ribbon suggests strong trend separation and momentum, while a contracting or flattening ribbon indicates weakening momentum or potential consolidation.
• Signal Markers: The "L" (Long) and "S" (Short) markers highlight slope flips. These signals indicate that the volatility-weighted trend has shifted direction relative to the previous bar.
• Support & Resistance: In established trends, the ribbon area often acts as a dynamic zone where price may find support (bullish) or resistance (bearish) during pullbacks.

Details

This script combines the lag-reduction benefits of the Hull Moving Average (HMA) with a custom volatility-weighting mechanism. Instead of a standard Weighted Moving Average (WMA), it uses an internal Volatility Weighted Moving Average (VWMA) that uses the Absolute True Range as the weighting source.

True Range is used because it accounts for gaps and price displacement from the previous close, making it a superior proxy for market activity compared to simple bar range. The calculation prioritizes recent bars with higher volatility, meaning the indicator reacts faster to aggressive price moves while remaining stable during low-range "noise."

Settings

Calculation Settings

• Price Source: Determines the price input (e.g., Close, HL2, OHLC4) used for the calculation.
• Lookback Period: Sets the smoothing length. Lower values increase responsiveness but may produce more whipsaws, while higher values provide a smoother trend with more lag.

Plotting Settings

• Plot as Band?: Toggles between a single trend line and a gradient ribbon-style display.
• Line Width: Adjusts the thickness of the VWHMA line (primarily used when band mode is off).
• Show Trend Candles?: When enabled, the chart candles are colored according to the current trend state.
• Show Signals?: Toggles the visibility of the Long/Short slope-flip markers.
• Long/Short Color: Customizes the colors used for bullish and bearish trend states.

FAQ

How do I interpret the ribbon gradient?

The gradient intensity is stronger near the lead VWHMA line and fades toward the offset reference line. A bright, wide ribbon indicates strong price displacement, while a fading or thin ribbon indicates the trend is losing its lead over the historical average.

Does this indicator use volume data?

No, despite using a VWMA-style calculation logic, it weights price based on the True Range (volatility) rather than traded volume. This makes it suitable for markets where volume data may be unreliable or unavailable.

How can I access Volatility Hull Ribbon?

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