Bar Volatility Estimator

AEdge Bar Volatility Estimator is just what it sounds like. It estimates the volatility of the previous bar in order to predict the volatility of the current bar. Think of it like the ATR (Average True Range) indicator, but less dumb. It presents the upwards volatility and downwards volatility separately so that you can also see which direction is currently the most volatile of the two (up or down).

There are multiple possible uses for this indicator in your analysis. Here are a few examples:

  • Assessing possible future risk.
  • Creating ranges for how far the next bar is likely to move.

The indicator settings have three main parameters:

  1. The first parameter, Data Source, sets the input to the indicator. This defaults to the close price of the main chart. You can change this to any other data source found on your chart.
  2. The second parameter, Number of Bars, under Lookback Window, sets the number of bars to use when estimating the parameters for the distribution that this volatility is derived from. One way to estimate the optimal sample size is to look at the autocorrelation of absolute log %-change using our Autocorrelogram indicator from the Researcher Pack and see when the autocorrelation is no longer significantly different to 0. This setting defaults to 30.
  3. The third parameter, Target, specifies the desired prediction target. If you select Average, the model predicts the average bar volatility. Select Tail-End to predict the wilder candle moves and select Extreme Tail-End to predict extreme candle moves.