L&S Volatility Index Refurbished█ Introduction
This is my second version of the L&S Volatility Index, hence the name "Refurbished".
The first version can be found at this link:
The reason I released a separate version is because I rewrote the source code from scratch with the aim of both improving the indicator and staying as close as possible to the original concept.
I feel that the first version was somewhat exotic and polluted in relation to the indicator originally described by the authors.
In short, the main idea remains the same, however, the way of presenting the result has been changed, reiterating what was said.
█ CONCEPTS
The L&S Volatility Index measures the volatility of price in relation to a moving average.
The indicator was originally described by Brazilian traders Alexandre Wolwacz (Stormer) and Fábio Figueiredo (Vlad) from L&S Educação Financeira.
Basically, this indicator can be used in two ways:
1. In a mean reversion strategy, when there is an unusual distance from it;
2. In a trend following strategy, when the price is in an acceptable region.
As an indicator of volatility, the greatest utility is shown in first case.
This is because it allows identifying abnormal prices, extremely stretched in relation to an average, including market crashes.
How the calculation is done:
First, the distance of the price from a given average in percentage terms is measured.
Then, the historical average volatility is obtained.
Finally the indicator is calculated through the ratio between the distance and the historical volatility.
According to the description proposed by the creators, when the L&S Volatility Index is above 30 it means that the price is "stretched".
The closer to 100 the more stretched.
When it reaches 0, it means the price is on average.
█ What to look for
Basically, you should look at non-standard prices.
How to identify it?
When the oscillator is outside the Dynamic Zone and/or the Fixed Zone (above 30), it is because the price is stretched.
Nothing on the market is guaranteed.
As with the RSI, it is not because the RSI is overbought or oversold that the price will necessarily go down or up.
It is critical to know when NOT to buy, NOT to sell or NOT to do anything.
It is always important to consider the context.
█ Improvements
The following improvements have been implemented.
It should be noted that these improvements can be disabled, thus using the indicator in the "purest" version, the same as the one conceived by the creators.
Resources:
1. Customization of limits and zones:
2. Customization of the timeframe, which can be different from the current one.
3. Repaint option (prints the indicator in real time even if the bar has not yet closed. This produces more signals).
4. Customization of price inputs. This affects the calculation.
5. Customization of the reference moving average (the moving average used to calculate the price distance).
6. Customization of the historical volatility calculation strategy.
- Accumulated ATR: calculates the historical volatility based on the accumulated ATR.
- Returns: calculates the historical volatility based on the returns of the source.
Both forms of volatility calculation have their specific utilities and applications.
Therefore, it is worthwhile to have both approaches available, and one should not necessarily replace the other.
Each method has its advantages and may be more appropriate in different contexts.
The first approach, using the accumulated ATR, can be useful when you want to take into account the implied volatility of prices over time,
reflecting broader price movements and higher impact events. It can be especially relevant in scenarios where unexpected events can drastically affect prices.
The second approach, using the standard deviation of returns, is more common and traditionally used to measure historical volatility.
It considers the variability of prices relative to their average, providing a more general measure of market volatility.
Therefore, both forms of calculation have their merits and can be useful depending on the context and specific analysis needs.
Having both options available gives users flexibility in choosing the most appropriate volatility measure for the situation at hand.
* When choosing "Accumulated ATR", if the indicator becomes difficult to see, there are 3 possibilities:
a) manually adjust the Fixed Zone value;
b) disable the Fixed Zone and use only the Dynamic Zone;
c) normalize the indicator.
7. Signal line (a moving average of the oscillator).
8. Option to normalize the indicator or not.
9. Colors to facilitate direction interpretation.
Since the L&S is a volatility indicator, it does not show whether the price is rising or falling.
This can sometimes confuse the user.
That said, the idea here is to show certain colors where the price is relative to the average, making it easier to analyze.
10. Alert messages for automations.
Indicator
Moving Average Rainbow (Stormer)This strategy is based and shown by trader and investor Alexandre Wolwacz "Stormer".
Overview
The strategy uses 12 moving averages (default EMA) to identify trends and generate trading signals opening positions.
Allowing to select the type of moving average and length to be used.
The conditions includes relationship between moving averages, the position of the current price relative to the moving averages, and the occurrence of certain price patterns.
Calculation
The mean moving averages is calculated by adding all the 12 moving averages and dividing by 12, the value is used to help to identify trend and possible condition to open position.
The 12 moving averages is spliced by 3 ranges, initial range (moving average lines 1 to 4), middle range (moving average lines 5 to 8) and end range (moving average lines 9 to 12). These ranges helps to identify potential trend and market turn over.
The moving average touch price is a relationship between the low price (uptrend) or high price (downtrend) with the moving average lines, it identifies where the price (low/high) has reached the the moving average line. Fetching the value to help for opening position, set stop loss and take profit.
Since the stop loss is based and set from the previous moving average touch price value, when position is about to be open and setting the stop loss value, there is a verification to check both current and previous moving average touch price to recalculate the stop loss value.
The turnover trend checks for a possible market turnover event, setting up a new profit target, this setting when enabled is to be helpful when a turnover occurs against the position to exit position with some profit based on highest high price if long or lowest low price if short.
The turnover signal is similar to turnover trend. The difference is that when this setting is enabled and it triggers, it simply exit the current position and opens up a reverse position, long goes short and short goes long. And there is an complement optional that checks current price exit profitable.
Entry Position
Long Position:
Price is higher than the mean moving averages. Meaning possible uptrend.
The lines of the middle range from the moving averages are in increasing order. Meaning possible uptrend.
The current high pierced up previous high.
Fetch the previous value of the moving average touch price. Meaning the low price has touched one of the moving average lines, which that value is conditioning to open position.
Short Position:
Price is lower than the mean moving averages. Meaning possible downtrend.
The lines of the middle range from the moving averages are in decreasing order. Meaning possible downtrend.
The current low pierced down previous low.
Fetch the previous value of the moving average touch price. Meaning the high price has touched one of the moving average lines, which that value is conditioning to open position.
Risk Management
Stop Loss:
The stop loss is based from the previous moving average touch price value, high price for short and low price for long or occurs an verification to check for both current and previous moving average touch price value and a recalculation is done to set the stop loss.
Take Profit:
According to the author, the profit target should be at least 1:1.6 the risk, so to have the strategy mathematically positive.
The profit target is configured input, can be increased or decreased.
It calculates the take profit based on the price of the stop loss with the profit target input.
Turnover Trend
Long Position:
The moving averages initial range lines signals a possible market turnover. Meaning long might be going short.
Fetches the highest high hit since the opening of the position, setting that value to the new profit target.
Short Position:
The moving averages initial range lines signals a possible market turnover. Meaning short might be going long.
Fetches the lowest low hit since the opening of the position, setting that value to the new profit target.
Strategy
Bollinger Bands Modified (Stormer)This strategy is based and shown by trader and investor Alexandre Wolwacz "Stormer".
Overview
The strategy uses two indicators Bollinger Bands and EMA (optional for EMA).
Calculates Bollinger Bands, EMA, highest high, and lowest low values based on the input parameters, evaluating the conditions to determine potential long and short entry signals.
The conditions include checks for crossovers and crossunders of the price with the upper and lower Bollinger Bands, as well as the position of the price relative to the EMA.
The script also incorporates the option to add an inside bar pattern check for additional information.
Entry Position
Long Position:
Price cross over the superior band of bollinger bands.
The EMA is used to add support for trend analysis, it is an optional input, when used, it checks if price is above EMA.
Short Position:
Price cross under the inferior band of bollinger bands.
The EMA is used to add support for trend analysis, it is an optional input, when used, it checks if price is under EMA.
Risk Management
Stop Loss:
The stop loss is calculated based on the input highest high (for short position) and lowest low (for long position).
It gets the length based on the input from the last candles to set which is the highest high and which is the lowest low.
Take Profit:
According to the author, the profit target should be at least 1:1.6 the risk, so to have the strategy mathematically positive.
The profit target is configured input, can be increased or decreased.
It calculates the take profit based on the price of the stop loss with the profit target input.
Strategy
Indicator
J2S Backtest: 123-Stormer StrategyThis backtest presents the 123-Stormer strategy created by trader Alexandre Wolwacz "Stormer". The strategy is advocates and shared by the trader through his YouTube channel without restrictions.
Note :
This is not an investment recommendation. The purpose of this study is only to share knowledge with the community on pulsewire.
What is the purpose of the strategy?
The strategy is to buy the 123-Stormer pattern at the bottom of an uptrend and sell the 123-Stormer pattern at the top of a downtrend, aiming for a short stop for a long profit target.
To which timeframe of a chart is it applicable to?
Recommended for weekly and daily charts, as the signals are more reliable, being that strategy a good option for swing and position trading.
What about risk management and success rate?
The profit target is established by the author as being twice the risk assumed. Also according to the author, the strategy is mathematically positive, reaching around 65% of success rate in tradings.
How are the trends identified in this strategy?
Two averages are plotted to indicate the trend, a fast EMA average with an 8-week close and a slow EMA average with an 80-week close.
Uptrend happens whenever the fast EMA is above the slow EMA and prices are above the fast EMA. In this case, we should start looking for a LONG entry based on the signal of the 123-Stromer pattern to buying.
On the other hand, downtrend happens when the fast EMA is below the slow EMA and prices are below the fast EMA. In this case, we should start looking for a SHORT entry based on the signal of the 123-Stromer pattern to selling.
How to identify the 123-Stormer pattern for a LONG entry?
This pattern consists of three candles. The first candle has a higher low than the second candle's low, and the third candle has a higher low than the second candle's low. In this pattern, we will buy as soon as a trade occurs above the third candle's high, placing a stop as soon as a trade occurs below the second candle's low, with profit target twice the risk assumed. In another words, the amplitude of the prices of the three candles from the third candle’s high upwards. (you can use fibonacci extension to determine your stops and profit targets).
Importantly, the low of the three candles must be above the fast EMA average and in an uptrend.
How to identify the 123-Stormer pattern for a SHORT entry?
This pattern consists of three candles. The first candle has a lower high than the second candle's high, and the third candle has a lower high than the second candle's high. In this pattern, we will sell as soon as a trade occurs below the third candle's low, placing a stop as soon as a trade occurs above the second candle's high, with profit target twice the risk assumed. In other words, the amplitude of prices of the three candles from the third candle’s low down (you can use fibonacci extension to determine your stops and profit targets).
Importantly, the high of the three candles must be below the fast average and in a downtrend.
Tips and tricks
According to the author, the best signal for both LONG or SHORT entry is when the third candle is a inside bar of second candle.
Backtest features
Backtest parameters are fully customizable. The user chooses to validate only LONG or SHORT entries, or both. It is also possible to determine the specific time period for running the backtests, as well as setting a threshold in candels for entry by the 123-Stormer pattern.
Furthermore, for validation purposes, you can choose to activate the best signal of the pattern recommended by the author of the strategy, as well as change the values of the EMA averages or even deactivate them.
Final message
Feel free to provide me with any improvement suggestions for the backtest script. Bear in mind, feel free to use the ideas in my script in your studies.
Strategy
LS Volatility Index█ OVERVIEW
This indicator serves to measure the volatility of the price in relation to the average.
It serves four purposes:
1. Identify abnormal prices, extremely stretched in relation to an average;
2. Identify acceptable prices in the context of the main trend;
3. Identify market crashes;
4. Identify divergences.
█ CONCEPTS
The LS Volatility Index was originally described by Brazilian traders Alexandre Wolwacz (Stormer) , Fabrício Lorenz , and Fábio Figueiredo (Vlad)
Basically, this indicator can be used in two ways:
1. In a mean reversion strategy , when there is an unusual distance from it;
2. In a trend following strategy , when the price is in an acceptable region.
Perhaps the version presented here may have some slight differences, but the core is the same.
The original indicator is presented with a 21-period moving average, but here this value is customizable.
I made some fine tuning available, namely:
1. The possibility of smoothing the indicator;
2. Choose the type of moving average;
3. Customizable period;
4. Possibility to show a moving average of the indicator;
5. Color customization.
█ CALCULATION
First, the distance of the price from a given average in percentage terms is measured.
Then, the historical average volatility is obtained.
Finally the indicator is calculated through the ratio between the distance and the historical volatility.
To facilitate visualization, the result is normalized in a range from 0 to 100.
When it reaches 0, it means the price is on average.
When it hits 100, it means the price is way off average (stretched).
█ HOW TO USE IT
Here are some examples:
1. In a return-to-average strategy
2. In a trend following strategy
3. Identification of crashes and divergences
█ THANKS AND CREDITS
- Alexandre Wolwacz (Stormer), Fabrício Lorenz, Fábio Figueiredo (Vlad)
- Feature scaler (for normalization)
- HPotter (for calc of Historical Volatility) Indicator
Strategy
IFR2The IFR2 strategy is based on the RSI indicator.
If the two period RSI is less than the overbought level (25 is the default, but you can configure it to be lower), a long position is placed at the close of the candle. If you are doing it live, you'd have to enter the market ~ 10 minutes before it closes, check the RSI, and buy if it is lower than your overbought level. This generates a discrepancy in the backtesting, but since it is a very small difference, it can be disregarded. Higher overbought levels generate more signals, but they mostly are unreliable. Lower values generates better yields, but they won't occur very often. This strategy is designed to be used in a daily graph, and I don't recommend using it in intraday periods, since you'll make too little money to compensate for the operational cost.
The strategy exits when the high price of two previous candles is reached. If the exit price is higher than the closing price of when you entered, you'll be at a profit, otherwise you'll be at a loss. The exit price is plotted in the graph and it's colors depends on the current open profit: positive values will be green, negative will be red.
This strategy completely disregards the current trend. Long orders will be placed even if you are at a strong down trend. This may seem odd, but you have to keep in mind that this is a volatility based strategy , not a trend following one.
This setup was designed by Alexandre Wolwacz, a.k.a. Stormer. Strategy
Reversal closing priceThe reversal closing price (RCP) is a candlestick pattern which follows two simples rules:
the low price of current candle needs to be lower than the low price of the last 2 candles
the closing price of current candle needes to be higher than the closing price of the last candle
This generates a signal for a long position. For a short position, the conditions are inverted:
the high price of current candle needs to be higher than the high price of the last 2 candles
the closing price of current candle needes to be lower than the closing price of the last candle
Since RCP is a trend follower indicator, the strategy is programmed in such a way that long positions are only placed if the short period EMA is above the long period EMA, and short positions are only placed if the short EMA is bellow the long EMA. Both periods are configurable, and should be ajusted for each asset.
This strategy uses a fixed stop loss and take profit, and the it's ratio is configurable. The stop price is one tick lower than the lowest price of X candles prior to the order execution for long positions, while in short positions it's one tick higher than the higher price. The amount of candles to lookback (X) is configurable. Both stop and take profit prices are displayed, the first as a red line, and the second as a green line.
This is the setting that I've found to work best with TVC:SPX , but you may find a better setting. While the RCP is universal, it's placement depends on the trend and it's strenght, something that is very heterogeneous among assets.
I really wish that I was able to place images, but I don't have PRO, so text will have to do.
This strategy was designed by Alexandre Wolwacz, a.k.a. Stormer. Strategy
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