Volatility Coil Edge

The Volatility Coil Edge indicator identifies price compression at session extremes to detect potential reversal points in intraday markets. By tracking localized volatility cycles, the tool highlights "coiling" price action where absorption occurs before a directional break, providing automated entry levels, stops, and targets.

Usage

The Usage section describes how the script can be used to identify high-probability reversal setups. The indicator is designed for liquid intraday assets such as futures (NQ, ES), major crypto pairs (BTC, ETH), and indices on the 3-minute to 15-minute timeframes.

• Identifying the Coil: Traders should monitor the dashboard for the "FORMING" state. This indicates price is beginning to contract.
• Waiting for the Zone: Once the state changes to "WATCH LONG" or "WATCH SHORT," the price has compressed within the top or bottom percentage of the recent session range. An orange dashed box will outline this compression area.
• Executing the Trigger: A signal is only valid on the bar close when price breaks the coil boundary in the opposite direction of the session extreme.
• Trade Management: Upon a signal, the tool plots an entry line, a structural stop loss (beyond the coil extreme), and three profit targets (TP1, TP2, TP3) based on R-multiples.

Details

The Volatility Coil Edge uses a custom volatility state machine rather than standard lagging oscillators. It relies on "session range physics," identifying tight consolidation at price extremes as a sign of exhaustion.

• Three-Layer Compression Logic: The engine qualifies a "coil" using a ratio of short-period ATR to background ATR, a drift-floor condition comparing current ranges to the median, and a "Catalyst Mode" that flags compression immediately following a large volatility expansion.
• Session Context: Unlike standard volatility filters, this tool ignores mid-range consolidation, focusing exclusively on compression at the session high or low where reversal probability is statistically higher.
• Violation Tolerance: The state machine includes logic to prevent minor price wicks from prematurely invalidating a valid coil, ensuring the structural integrity of the pattern is maintained.
• R-Multiple Framework: All targets are calculated as multiples of the risk (stop distance). TP1 (1.0R) marks the break-even point, TP2 (1.5R) serves as the primary partial, and TP3 (2.0R) represents the full target.

Settings

Coil Detection

• Sensitivity: Choose between Conservative (strict/fewer signals), Balanced (default), or Aggressive (looser/more signals).
• Catalyst Mode: Toggles detection of post-impulse coils forming after a significant price move.
• Use Manual Overrides: Enables the manual tuning of contraction parameters.

Manual Tuning

• Min/Max Bars: Sets the required duration of the compression before a signal can trigger.
• Contraction Ratio: Defines how tight the local ATR must be relative to the background ATR.
• Extreme Zone %: Determines what percentage of the session range constitutes the high or low "extreme."

Engine & Risk

• Session Range Lookback: Sets the number of bars used to calculate the rolling session high/low.
• SL Buffer: ATR multiplier added to the coil structural extreme for the stop loss.
• Min/Max SL Distance: Floors and ceilings for the stop loss to ensure realistic risk/reward ratios.
• TP1, TP2, TP3: User-adjustable R-multiples for take-profit targets.

Visuals

• Minimalist Signal Card: Simplifies signal labels to only show direction.
• Visual Toggles: Options to show or hide the Coil Box, Signal Bar Highlights, Concentric Rings, and the Dashboard.

FAQ

What timeframes are best for this indicator? The script is optimized for the 15-minute timeframe for structural clarity, though the 3-minute and 5-minute timeframes are highly effective for standard intraday trading.

Does this indicator repaint? No, all signals and visual elements are confirmed and plotted only upon the close of the bar, ensuring historical accuracy.

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