Range Volatility Node
Percentage-Based Volatility Measure
Overview
Range Volatility measures the average intrabar price dispersion as a percentage of the closing price, then smooths the result using a Simple Moving Average. This gives a cleaner volatility measurement normalized to price levels.
By expressing volatility as a percentage, Range Volatility is comparable across different securities and price levels. High values indicate significant price movement within periods, ideal for entry planning. Low values suggest tight consolidation.
Formula
Parameters
| Parameter | Type | Default | Description |
|---|---|---|---|
| period | number | 14 | Lookback period for SMA of range |
Common Use Cases
1. Volatility Measurement
Get normalized percentage measurement of price volatility directly comparable across securities.
2. Risk Assessment
Higher Range Volatility means higher risk and potential reward. Adjust position sizes accordingly.
3. Position Sizing
Scale position size inversely with Range Volatility to maintain consistent dollar risk across trades.
4. Entry Planning
Know expected daily/period range for better entry timing and support/resistance placement.
Advantages & Limitations
Advantages
- •Normalized percentage view
- •Comparable across different securities
- •Simple interpretation
- •Useful for position sizing
Limitations
- •Lagging due to SMA smoothing
- •Doesn't capture gap volatility
- •Can be volatile itself
Tips & Best Practices
📊 Establish Baselines
Calculate average Range Volatility for each security in normal conditions to identify high/low readings.
⚡ Adjust for Market Conditions
Volatility spikes during earnings or market-wide events. Don't assume it's normal variation.
💰 Dynamic Stop Losses
Set stop distance in percentage terms based on Range Volatility rather than fixed points/cents.
⚠️ Use with Other Volatility Measures
Complement with ATR or StdDev for more robust volatility assessment.
Example Strategy
Dynamic position sizing based on Range Volatility:
1. Calculate Average RV
Get 100-bar average Range Volatility for your security
2. Size Adjustment Formula
Position Size = (Risk $ / Entry Price) × (Average RV / Current RV)
3. Apply Position Size
High RV = smaller position, Low RV = larger position. Keeps risk constant.
4. Set Stops
Stop distance = Entry ± (Current RV × 1.5). Adapts to market conditions.
Related Indicators
ADR
Average daily range in dollar terms
ATR
True range-based volatility
NATR
Normalized ATR for comparison
StdDev
Statistical volatility measure