# Volatility Ratio Volatility Ratio is an indicator on [Vela](https://vela.luxalgo.com/chart), our next-generation charting platform, written in Pine Script®. Volatility Ratio plots a dimensionless activity gauge in two constructions: Schwager's wide-range-bar test (true range against a 14-bar baseline, with event diamonds above 2) or short 5-bar volatility over a long 20-bar baseline, read around 1. A dashboard adds the close-in-range directional hint. For traders who want unusual bars flagged the moment they print. - Indicator in the LuxAlgo Library, by LuxAlgo, published Feb 6, 2026. - Access: free. - Concepts: [Volatility Ratio](https://www.luxalgo.com/library/concept/volatility-ratio/) (primary) - Open on Vela: https://vela.luxalgo.com/chart?pineScriptCodeId=d0ar02drck6x5z89zzqb7v6x - Page: https://www.luxalgo.com/library/indicator/volatility-ratio/ **Volatility Ratio** reduces "was that bar unusual?" to a single dimensionless number. Its default mode implements the [Volatility Ratio](https://www.luxalgo.com/library/concept/volatility-ratio/) as Jack Schwager framed it (the current bar's true range over a trailing baseline, flagging wide-range bars with diamonds above a threshold), while a second mode divides short-lookback by long-lookback volatility, read around a dashed 1 line. ## How to Trade the Volatility Ratio? - **Wide-range event bar**: a reading above the Event Threshold marks a bar that swallowed an unusually large share of recent movement, often news, breakouts, or capitulation. The ratio measures size only. The dashboard's close-in-range figure adds the directional hint. - **Expansion above 1**: in Short vs Long mode the market runs hotter than its own norm; the 1-line crossings are alerted both ways. - **Contraction below 1**: conditions cooling, where squeeze setups form. ## Volatility Ratio Settings - **Ratio Mode** (default Wide-Range Bar (Schwager)): the event-bar construction, or Short vs Long Volatility. - **Baseline Length** (default 14): trailing window the bar is measured against, taken on the prior bar so a bar never inflates its own reference. - **Baseline Type** (default Average True Range): the window's ATR, or the gap-adjusted Window Span, which runs smaller and needs lower cutoffs. - **Event Threshold** (default 2): the wide-range cut, about twice the typical recent bar with the ATR baseline; a convention, not a law. - **Mark Event Bars** (default enabled): diamonds at the top of the pane. - **Short Length** (default 5) and **Long Length** (default 20): the fast and slow windows of the short-over-long form. - **Volatility Basis** (default ATR): ATR or Standard Deviation on both sides, with **Stdev Source** (default close) feeding the latter. - **Show Dashboard** (default enabled) and **Gradient Fill** (default enabled): the readout panel and fill from zero. ## Frequently Asked Questions ### Why a ratio instead of just reading ATR? [Average True Range](https://www.luxalgo.com/library/indicator/average-true-range/) is expressed in price units, so its level does not carry over between symbols or eras. Dividing one range measure by another cancels the units: a reading of 2 reads identically on any chart. ### Do event bars predict direction? No. The construction works purely on range sizes, so it carries no directional read. A bar closing on its high says something different from one closing mid-range; read the close and surrounding structure for the lean. ### Which mode should I run? Wide-Range Bar isolates single-bar events and suits news and breakout study. Short vs Long tracks where volatility sits relative to its own norm: regime work, sizing, and timing compression setups. ## Related indicators - [Hot Zone Radar](https://www.luxalgo.com/library/indicator/hot-zone-radar/) (Volatility Percentile/rank): markdown at https://www.luxalgo.com/library/indicator/hot-zone-radar.md - [Volatility Signature Plot](https://www.luxalgo.com/library/indicator/volatility-signature-plot/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/volatility-signature-plot.md - [The Range Indicator](https://www.luxalgo.com/library/indicator/the-range-indicator/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/the-range-indicator.md - [Jump Detection](https://www.luxalgo.com/library/indicator/jump-detection/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/jump-detection.md - [Volatility of Volatility](https://www.luxalgo.com/library/indicator/volatility-of-volatility/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/volatility-of-volatility.md - [Garman-Klass–Yang-Zhang Hybrid](https://www.luxalgo.com/library/indicator/garman-klass-yang-zhang-hybrid/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/garman-klass-yang-zhang-hybrid.md - [GARCH-family Clustering](https://www.luxalgo.com/library/indicator/garch-family-clustering/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/garch-family-clustering.md - [Kase Studies](https://www.luxalgo.com/library/indicator/kase-studies/) (Volatility): markdown at https://www.luxalgo.com/library/indicator/kase-studies.md --- Source: https://www.luxalgo.com/library/indicator/volatility-ratio/ (LuxAlgo Library). Free to use with attribution: https://www.luxalgo.com/library/license/