Description:
The Historical Volatility Ratio is an essential tool used by investors and traders to measure the volatility of a financial instrument over a specific period. The ratio is beneficial in identifying potentially explosive market moves by comparing short and long-term historical volatility.
Input Parameters:
- Length: Number of periods used in the calculation.
- Annual Volume: Specifies the period over which to measure volatility,
- Price Source: The specific data points (such as open, high, low, or close) from each candle in a financial chart that an indicator uses for mathematical computations, enabling the calculation of metrics like the average over a specified period.
Use Cases:
- Identifying Explosive Market Moves: When a market’s short volatility declines below a certain percentage of its long volatility, it may indicate an imminent explosive move. For instance, if the Historical Volatility Ratio falls below 50%, it suggests that the short-term volatility is less than half of the long-term volatility, which could signal a significant price movement in the near future.
This feature can be used in:
- Market Scanner
- Strategy Tester
- Multi-Factor Alerts
- Smart Checklist
Do you want to learn more? Check out our Learning Center Article.