Volatility based Standard Deviation and Fib. Pivot Points
Jul 26, 2020
The Volatility based Standard Deviation and Fib. Pivot Points indicator provides a comprehensive set of volatility-anchored support and resistance levels based on manual settlement prices and VIX data.
Usage
The Usage section focuses on how to plot dynamic volatility levels for specific trading sessions. To use this tool, the user must manually input the previous day's settlement or closing price of the asset, along with the closing value of a relevant volatility index (e.g., VIX for ES/RTY, or VXN for NQ).
- Standard Deviation Levels: These levels act as primary targets or reversal zones based on statistical volatility.
- Fibonacci Pivot Points: These provide secondary support and resistance layers calculated using Fibonacci ratios applied to the volatility-based "move."
- Multi-Asset Application: While originally designed for indices using the VIX, it can be applied to individual stocks or forex pairs by utilizing the corresponding volatility metrics.
Details
This tool implements a specific calculation for daily moves based on the "Rule of 16" (vixClose / 16) and a Z-table constant (0.0625). The standard deviation (SD) is calculated as:
sd = settlementPrice * (vixClose / 100) * 0.0625
The indicator then projects multiple tiers of upper and lower deviations (ranging from 0.25 to 4.00 SD) and Fibonacci-weighted pivot points (including 23.6%, 38.2%, 61.8%, etc.). These lines remain horizontal based on the static inputs provided at the start of a session, offering a fixed roadmap for price action throughout the day.
Settings
- Settlement Price: The closing or settlement price of the instrument from the previous session.
- VIX Closing: The closing value of the Volatility Index (VIX, VXN, etc.) to be used for the volatility calculation.
FAQ
How do I use this for Nasdaq (NQ)?
For NQ, it is recommended to enter the settlement price of the NQ futures and use the VXN closing price for the VIX input.
Can this be used for Forex?
Yes, you can use this for Forex pairs by entering the settlement price and a relevant volatility measure or implied volatility percentage.
How can I access Volatility based Standard Deviation and Fib. Pivot Points?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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