OPEN-SOURCE SCRIPT
Updated VIX Oscillator
OVERVIEW
Plots an oscillating value as a percentage, derived from the VIX and VIX3M. This can help identify broader market trends and pivots on higher time frames (ie. 1D), useful when making swing trades.
DATA & MATH
The VIX is a real-time index of expected S&P 500 volatility over the next 30 days, derived from option prices with near-term expirations. Similarly, the VIX3M measures expected volatility over the next 90 days.
Dividing one by the other yields an oscillating value, normalizing the relative strength of the expected volatility. Most commonly the VIX is divided by the VIX3M. However, because the VIX is inversely correlated to market sentiment (typically), this indicator divides the VIX3M by the VIX to visually correlate the plot direction with the anticipated market direction. Further, it subtracts 1.1 from the quotient to visually center the plot, and multiplies that difference by 100 to amplify the value as a percentage:
( VIX3M / VIX - 1.1 ) * 100
This variation makes identifying sentiment extremes easier within a buy-low-sell-high paradigm, where values below zero are bearish and values above zero are bullish.
PLOTS
Two plots are used, maximizing data fidelity and convenience. Candles are used to accurately reflect the quantized math and a Linear Regression is used to simplify contextualization. If you're not familiar with what a Linear Regression is, you can think of it like a better moving average. High / Low zones are also plotted to help identify sentiment extremes.
This combination allows you to quickly identify the expected sentiment (bullish / bearish) and its relative value (normal / extreme), which you can then use to anticipate if a trend continuation or pivot is more likely.
INPUTS
Candle colors (rise and fall)
Linear regression colors and length
Zone thresholds and zero line
Plots an oscillating value as a percentage, derived from the VIX and VIX3M. This can help identify broader market trends and pivots on higher time frames (ie. 1D), useful when making swing trades.
DATA & MATH
The VIX is a real-time index of expected S&P 500 volatility over the next 30 days, derived from option prices with near-term expirations. Similarly, the VIX3M measures expected volatility over the next 90 days.
Dividing one by the other yields an oscillating value, normalizing the relative strength of the expected volatility. Most commonly the VIX is divided by the VIX3M. However, because the VIX is inversely correlated to market sentiment (typically), this indicator divides the VIX3M by the VIX to visually correlate the plot direction with the anticipated market direction. Further, it subtracts 1.1 from the quotient to visually center the plot, and multiplies that difference by 100 to amplify the value as a percentage:
( VIX3M / VIX - 1.1 ) * 100
This variation makes identifying sentiment extremes easier within a buy-low-sell-high paradigm, where values below zero are bearish and values above zero are bullish.
PLOTS
Two plots are used, maximizing data fidelity and convenience. Candles are used to accurately reflect the quantized math and a Linear Regression is used to simplify contextualization. If you're not familiar with what a Linear Regression is, you can think of it like a better moving average. High / Low zones are also plotted to help identify sentiment extremes.
This combination allows you to quickly identify the expected sentiment (bullish / bearish) and its relative value (normal / extreme), which you can then use to anticipate if a trend continuation or pivot is more likely.
INPUTS
Candle colors (rise and fall)
Linear regression colors and length
Zone thresholds and zero line
Release Notes
- Added indicator page link to the top of the source code.
Release Notes
- Improved logic to more gracefully handle null values on lower timeframes
- Other minor enhancements
Release Notes
- Added ability to explicitly disable / enable plot inversion.
- Other minor code enhancements.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Discord: discord.gg/bPAPhwUeud
Website: liquid-trader.com
Website: liquid-trader.com
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.
Open-source script
In true TradingView spirit, the creator of this script has made it open-source, so that traders can review and verify its functionality. Kudos to the author! While you can use it for free, remember that republishing the code is subject to our House Rules.
Discord: discord.gg/bPAPhwUeud
Website: liquid-trader.com
Website: liquid-trader.com
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.