Volatility Ratio Node
Short-Term vs Long-Term Volatility Comparison
Volatility Ratio compares short-term ATR to long-term ATR, showing whether volatility is expanding or contracting relative to recent history. Ratios above 1.0 indicate elevated volatility; below 1.0 indicate compressed volatility. Useful for identifying volatility expansion setups and regime changes.
Formula
Parameters
| Parameter | Default |
|---|---|
| short period | 5 |
| long period | 20 |
Use Cases
1. Volatility Expansion Trading
Enter breakouts when VR rises above 1.2 indicating expansion.
2. Squeeze Identification
VR below 0.8 indicates volatility compression preceding moves.
3. Trend Confirmation
Rising VR confirms trend strength; falling VR warns of weakening.
4. Position Management
Exit partial profits when VR peaks after sustained expansion.
Tips & Best Practices
📊 Establish Zone Baselines
VR around 1.0 = normal, > 1.3 = expanding, < 0.7 = compressing for most markets.
⚡ Confirm with Price Action
expanding VR + breakout = stronger setup than expansion alone.
💰 Adjust Stops by VR
Use wider stops during high VR, tighter stops during VR compression.
⚠️ Mean Reversion
Extreme VR readings (> 1.5 or < 0.6) often revert to baseline; fade extremes carefully.
Related Indicators
ATR
Base volatility measure VR uses
Choppiness Index
Alternative trend vs chop detector
Bollinger Bands
Volatility-based support/resistance bands
RAVI
Range-based momentum confirmation