Volatility Explosion
SETTING MANUAL
1/ What is the Volatility Explosion indicator?
Introduction:
The Volatility Explosion Indicator is a breakout-focused volatility tool designed to help traders enter the market at the exact moment volatility expands right after a period of compression.
Instead of chasing price after a large move, this indicator identifies low-volatility conditions first using Bollinger Band Width (BBW) and ATR-based compression logic. Once volatility contracts below a calculated threshold, the indicator waits for price to break structure, signaling the start of a potential explosive move.
Bullish and bearish entries are triggered only when volatility expansion begins, ensuring traders avoid entering during sideways or low-energy market conditions.
Benefits:
- Volatility Compression Recognition: Detects statistically significant volatility contraction phases that typically precede momentum expansion.
- Early Breakout Participation: Enables entries during the initial expansion phase, before directional moves fully develop.
- Structure-Confirmed Timing: Generates signals only after confirmed structural breaks following compression.
- Market Noise Filtering: Suppresses signals during ranging markets and unstable volatility environments.
2/ Indicator Setting - Volatility Explosion
Core Volatility Detection Settings
Compression Factor (P)
Defines the sensitivity of volatility compression detection.
- Default value: 2
- Adjustable range: 1–10
Compression Level (F)
Automatically calculated as:
ATR × Compression Factor (P)
This value represents the volatility threshold used to confirm a compression phase.
ATR Period
Sets the number of bars used to calculate Average True Range (ATR).
Shorter periods respond faster to volatility changes.
Longer periods provide smoother volatility measurement.
Bollinger Band Width (BBW)
Measures the distance between the upper and lower Bollinger Bands.
The indicator compares BBW against the Compression Level (F) to detect low-volatility conditions.
Breakout Logic
When Bollinger Width is below the Compression Level (F), the market is considered compressed.
Bullish Entry Condition
A bullish signal is generated when price breaks above the previous candle’s high after compression.
Bearish Entry Condition
A bearish signal is generated when price breaks below the previous candle’s low after compression.
This logic ensures trades are triggered only when volatility expansion begins, not during consolidation.
Signal Display Settings
Bullish Signal Text
Custom text shown on the chart when a bullish breakout occurs (e.g., “Volatility Breakout Buy”).
Bearish Signal Text
Custom text shown on the chart when a bearish breakout occurs (e.g., “Volatility Breakout Sell”).
Bullish Signal on Chart Color
Choose the color used to highlight bullish breakout signals.
Bearish Signal on Chart Color
Choose the color used to highlight bearish breakout signals.
Risk Management (SL & TP)
Stop Loss Line Color
Select the color of the stop loss line displayed on the chart.
Take Profit Line Color
Select the color of the take profit line for clear visual separation.
Allow Draw SL and TP Labels
Enable or disable text labels for Stop Loss and Take Profit levels.
Stop Loss Label Color
Set the color of the stop loss label.
Take Profit Label Color
Set the color of the take profit label.
SL Detection Distance (Days)
Defines how far back the indicator looks for swing highs or lows to anchor the stop loss.
Higher values place SL at more significant structural levels.
ATR Period for SL Shift
Number of bars used to calculate ATR for volatility-based stop loss placement.
SL Shift Coefficient (from ATR)
Multiplier applied to ATR to determine stop loss distance.
TP Coefficient (from SL)
Defines take profit distance as a multiple of the stop loss, ensuring consistent risk reward ratios.
Alert Control
Show Alerts
Enable or disable alerts when bullish or bearish volatility breakout signals occur.
Alerts can be delivered via pop-up, sound, email, webhook, or push notification.
- How can I set up alerts?
To stay updated on potential trading opportunities, you can set up alerts within the Volatility Explosion
Step 1:
From the indicator settings, customize your alerts by defining your desired parameters. The selected configurations will be used for notifications in Step 2.
Step 2:
Click TradingView’s “Alert” icon to enable notifications such as pop-ups, sound alerts, emails, Webhook URL, or email-to-SMS.
Step 3:
In the Condition dropdown list, select “Volatility Explosion”
Step 4:
Select “Any alert() function call”, then click “Notifications.”
Step 5:
Choose how you want to receive alerts and click “Create.”
