[NIC] Volatility Anomaly Indicator (Inspired by Jeff Augen)

Volatility Anomaly Indicator (Inspired by Jeff Augen)


The Volatility Anomaly Indicator, inspired by Jeff Augen’s The Volatility Edge in Options Trading, helps traders spot price distortions by analyzing volatility imbalances. It compares short-term (10-day) and long-term (30-day) historical volatility (HV), plotting the ratio in a subgraph with clusters of dots to highlight anomalies—red for volatility spikes (potential sells) and green for calm periods (potential buys).

Originality: This indicator uniquely adapts Augen’s volatility concepts into a visual tool, focusing on relative volatility distortions rather than absolute levels, making it ideal for volatile assets like $TQQQ.
Features:

• Calculates the ratio of short-term to long-term volatility.
  
• Detects spikes (ratio > 1.5) and calm periods (ratio < 0.67) with customizable thresholds.
  
• Plots volatility ratio as a blue line, with red/green dots for anomalies.
  
• Includes optional buy/sell signals on the main chart (if overlay is enabled).
  

How It Works
The indicator computes historical volatility using log returns, then calculates the short-term to long-term volatility ratio. Spikes and calm periods are marked with dots in the subgraph, and threshold lines (1.5 and 0.67) provide context. Buy signals (green triangles) trigger during calm periods, and sell signals (red triangles) during spikes.
How to Use
Apply to any chart (e.g., TQQQ daily).

• Adjust inputs: Short Volatility Period (10), Long Volatility Period (30), Volatility Spike Threshold (1.5).
  
• Watch for red dot clusters (spikes, potential sells) and green dot clusters (calm, potential buys).
  
• Combine with price action or RSI for confirmation.
  

Why Use This Indicator?
Focuses on volatility-driven price inefficiencies.

Clear visualization with dot clusters.

Customizable for different assets and timeframes.

Limitations
Not a standalone system; requires confirmation.

May give false signals in choppy markets.