Whittaker Volatility Breakout Indicator

I wanted to share with everyone an indicator that I programmed and I find very useful. It is called the Whittaker Volatility Breakout Indicator or WVBI. The purpose of this indicator is to represent the range of a bar in percentage terms rather than in points. I think the flaw of most traders or programmers is they often write code and optimize it for pips of a given pair. This I truely believe is one of the core fundamental flaws of sustainability of a strategy. When people start programming static values. Whether it be in money management, entries, exits, or take profit levels.

Download WVBI!

What this indicator does is as follows:

1. Takes the range(high-low) the last x bars.
2. Averages the range of the last x bars.
3. Displays as a histogram the percentage of change from the average.
4. Takes an average of the percentage of change from the average.
5. Allows you to set a horizontal line at your preference so you can see when the average is breaking out.

This indicator has 3 inputs:

1. “ATRPeriod” which allows you to specify the amount of bars to average out for the Average True Range of that period
2. “WVBIAverage” is a setting that allows you to specify the amount of bars to which will be the average of the percentage of the ATR.
3. The last setting is pretty straightforward it is “TooFar”.  This simply will draw a horizontal line across the indicator so that you can visually see where the percentage is in comparison to other bars.  Its purpose is to simply put things in perspective.

All of this might seem confusing at first. However, I assure you this a very useful indicator for detecting volatility in a market.

You can see from this example of above the bar in question exceed it’s 14 day ATR by 203.95%.

2 Comments for this entry

• 

  Mike

  February 28th, 2010 on 5:21 pm

  I am convinced that there is out there somewhere, or it’s possible to create, an indicator which, when built into an EA, would detect spikes as they start and “ride” them to their conclusion with a trailing stop. This one looks as if it is almost there, but the bars need to go up for a buy trade and down for a sell trade.Is that possible? I tried an ROC indicator but no matter how high I set the trigger value it opened trades every few minutes, presumably because the value shoots skyward momentarily as soon as a change occurs, even if it doesn’t register on the visual. A timer would have helped, so the value has to be sustained for x ticks or so, but that wasn’t possible with the EA Builder I was using.
  Do you think it is worth pursuing? Wouldn’t it be nice to be able to look forward to spikes occurring instead of living in fear of them?
  Regards
  Mike
• 

  Jeremy

  February 28th, 2010 on 8:11 pm

  I could potentially program it up for buy and down for sell. But that is not the purposes of this particular indicator. My purpose behind programming this was to determine market volatility. It is only one indicator in my toolset to determine buy or sell.

  As far as looking forward to spikes instead of living in fear of them I do not live in fear of spikes. Once you have a solid EA and you have backtested it you shouldn’t have any concerns. I would recommend finding an indicator that breaks the highest high or lowest low and then enter. There is always a profitable way to play the market. It just depends on how you look at it.