VoltyChannel_Stop_v1

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Author: Copyright � 2005, TrendLaboratory Ltd.
VoltyChannel_Stop_v1

This tool is designed to help traders identify market trends and manage risk by automatically calculating dynamic "stop-loss" levels based on market volatility. Instead of using a fixed price point, it adapts to how much the market is moving at any given moment.

Core Logic and Mechanism

Volatility-Based Boundaries The script uses a common technical metric called the Average True Range (ATR) to measure current market "noise" or volatility. It calculates two boundaries—an upper and a lower limit—around the current price. The distance between these boundaries is determined by a user-defined sensitivity factor, ensuring that in calmer markets, the boundaries stay tight, and in volatile markets, they expand automatically to accommodate larger swings.

Trend Detection The logic determines the direction of the market by observing when the closing price breaks through these volatility boundaries:

  • Upward Trend: If the price closes above the previous high boundary, the script identifies a bullish move.
  • Downward Trend: If the price closes below the previous low boundary, the script identifies a bearish move.

Dynamic Trailing Stops Once a trend is established, the tool tracks the "extreme" boundaries of that movement:

  • In an Upward Trend, it monitors the lower boundary. If that boundary moves higher without being violated, the stop level follows it upward. It acts as a trailing stop, locking in profits as the price climbs.
  • In a Downward Trend, it monitors the upper boundary, moving it downward as the price falls.

Visual Signals and Customization The script provides several visual ways to interact with this data:

  • Lines: It can draw continuous lines on your chart representing these dynamic stops so you can see the "floor" or "ceiling" of the current trend.
  • Signals: Based on your preferences, it can display specific arrows or markers. These appear when the trend flips—for example, marking the exact point where a move from bearish to bullish is confirmed, or vice versa.
  • Offsetting: There is an option to add an additional "safety buffer" (MoneyRisk) to the stops, allowing traders to give the market more room to breathe before a signal is triggered.

Summary for the User

Essentially, this script acts as an automated "safety net." It looks at how much the price is currently swinging and draws a line behind the move. If the price reverses sharply enough to hit that line, it signals a change in trend. This helps traders stay in profitable moves longer while providing a logical, data-driven point to exit a position when the momentum shifts.

Indicators Used
Indicator of the average true range
Miscellaneous
Implements a curve of type %1
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VoltyChannel_Stop_v1 
//+------------------------------------------------------------------+
//|                                         VoltyChannel_Stop_v1.mq4 |
//|                           Copyright © 2005, TrendLaboratory Ltd. |
//|            http://finance.groups.yahoo.com/group/TrendLaboratory |
//|                                       E-mail: igorad2004@list.ru |
//+------------------------------------------------------------------+
#property copyright "Copyright © 2005, TrendLaboratory Ltd."
#property link      "http://finance.groups.yahoo.com/group/TrendLaboratory"
//----
#property indicator_chart_window
#property indicator_buffers 6
#property indicator_color1 Chartreuse
#property indicator_color2 Red
#property indicator_color3 Chartreuse
#property indicator_color4 Red
#property indicator_color5 Chartreuse
#property indicator_color6 Red
//---- input parameters
extern int    Length=10;      // Volatility(ATR) Period
extern double Kv=1.00;        // Sensivity Factor
extern double MoneyRisk=1.00; // Offset Factor
extern int    Signal=1;       // Display signals mode: 1-Signals & Stops; 0-only Stops; 2-only Signals;
extern int    Line=1;         // Display line mode: 0-no,1-yes  
extern int    Nbars=1000;
//---- indicator buffers
double UpTrendBuffer[];
double DownTrendBuffer[];
double UpTrendSignal[];
double DownTrendSignal[];
double UpTrendLine[];
double DownTrendLine[];
//+------------------------------------------------------------------+
//| Custom indicator initialization function                         |
//+------------------------------------------------------------------+
  int init()
  {
   string short_name;
//---- indicator line
   SetIndexBuffer(0,UpTrendBuffer);
   SetIndexBuffer(1,DownTrendBuffer);
   SetIndexBuffer(2,UpTrendSignal);
   SetIndexBuffer(3,DownTrendSignal);
   SetIndexBuffer(4,UpTrendLine);
   SetIndexBuffer(5,DownTrendLine);
   SetIndexStyle(0,DRAW_ARROW);
   SetIndexStyle(1,DRAW_ARROW);
   SetIndexStyle(2,DRAW_ARROW);
   SetIndexStyle(3,DRAW_ARROW);
   SetIndexStyle(4,DRAW_LINE);
   SetIndexStyle(5,DRAW_LINE);
   SetIndexArrow(0,159);
   SetIndexArrow(1,159);
   SetIndexArrow(2,108);
   SetIndexArrow(3,108);
   IndicatorDigits(MarketInfo(Symbol(),MODE_DIGITS));
//---- name for DataWindow and indicator subwindow label
   short_name="VoltyChannel Stop("+Length+")";
   IndicatorShortName(short_name);
   SetIndexLabel(0,"UpTrend Stop");
   SetIndexLabel(1,"DownTrend Stop");
   SetIndexLabel(2,"UpTrend Signal");
   SetIndexLabel(3,"DownTrend Signal");
   SetIndexLabel(4,"UpTrend Line");
   SetIndexLabel(5,"DownTrend Line");
//----
   SetIndexDrawBegin(0,Length);
   SetIndexDrawBegin(1,Length);
   SetIndexDrawBegin(2,Length);
   SetIndexDrawBegin(3,Length);
   SetIndexDrawBegin(4,Length);
   SetIndexDrawBegin(5,Length);
//----
   return(0);
  }
//+------------------------------------------------------------------+
//| VoltyChannel_Stop_v1                                             |
//+------------------------------------------------------------------+
int start()
  {
   int    i,shift,trend;
   double smax[25000],smin[25000],bsmax[25000],bsmin[25000];
//----
   for(shift=Nbars;shift>=0;shift--)
     {
      UpTrendBuffer[shift]=0;
      DownTrendBuffer[shift]=0;
      UpTrendSignal[shift]=0;
      DownTrendSignal[shift]=0;
      UpTrendLine[shift]=EMPTY_VALUE;
      DownTrendLine[shift]=EMPTY_VALUE;
     }
   for(shift=Nbars-Length-1;shift>=0;shift--)
     {
      smax[shift]=Close[shift]+Kv*iATR(NULL,0,Length,shift);
      smin[shift]=Close[shift]-Kv*iATR(NULL,0,Length,shift);
//----
      if (Close[shift]>smax[shift+1]) trend=1;
      if (Close[shift]<smin[shift+1]) trend=-1;
      if(trend>0 && smin[shift]<smin[shift+1]) smin[shift]=smin[shift+1];
      if(trend<0 && smax[shift]>smax[shift+1]) smax[shift]=smax[shift+1];
//----
      bsmax[shift]=smax[shift]+(MoneyRisk-1)*iATR(NULL,0,Length,shift);
      bsmin[shift]=smin[shift]-(MoneyRisk-1)*iATR(NULL,0,Length,shift);
//----
      if(trend>0 && bsmin[shift]<bsmin[shift+1]) bsmin[shift]=bsmin[shift+1];
      if(trend<0 && bsmax[shift]>bsmax[shift+1]) bsmax[shift]=bsmax[shift+1];
      if (trend>0)
        {
         if (Signal>0 && UpTrendBuffer[shift+1]==-1.0)
           {
            UpTrendSignal[shift]=bsmin[shift];
            UpTrendBuffer[shift]=bsmin[shift];
            if(Line>0) UpTrendLine[shift]=bsmin[shift];
           }
         else
           {
            UpTrendBuffer[shift]=bsmin[shift];
            if(Line>0) UpTrendLine[shift]=bsmin[shift];
            UpTrendSignal[shift]=-1;
           }
         if (Signal==2) UpTrendBuffer[shift]=0;
         DownTrendSignal[shift]=-1;
         DownTrendBuffer[shift]=-1.0;
         DownTrendLine[shift]=EMPTY_VALUE;
        }
      if (trend<0)
        {
         if (Signal>0 && DownTrendBuffer[shift+1]==-1.0)
           {
            DownTrendSignal[shift]=bsmax[shift];
            DownTrendBuffer[shift]=bsmax[shift];
            if(Line>0) DownTrendLine[shift]=bsmax[shift];
           }
         else
           {
            DownTrendBuffer[shift]=bsmax[shift];
            if(Line>0)DownTrendLine[shift]=bsmax[shift];
            DownTrendSignal[shift]=-1;
           }
         if (Signal==2) DownTrendBuffer[shift]=0;
         UpTrendSignal[shift]=-1;
         UpTrendBuffer[shift]=-1.0;
         UpTrendLine[shift]=EMPTY_VALUE;
        }
     }
   return(0);
  }
//+------------------------------------------------------------------+

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