Abiroid Volatility Cloud

Features at a Glance

• Multi-Band System: 4 bands above and below a center line, creating 9 distinct layers
• ALMA-Based Center Line: Smooth, responsive moving average that filters noise effectively
• Volatility Bands: Automatically adjusts to market volatility using Standard Deviation
• Keltner Channel Integration: Blends ATR-based channels with standard deviation for robust band placement
• Alert System: Get notified when price crosses key band levels

---

What Is the Volatility Cloud?

The Core Concept

The Volatility Cloud is a volatility-based channel indicator that wraps multiple bands around a central moving average. Think of it as a visual representation of where price might move based on recent volatility patterns.

The Three Main Components

1. Center Line (ALMA): The foundation of the indicator. The Arnaud Legoux Moving Average (ALMA) serves as the primary trend line, filtering out market noise while remaining responsive to price changes.

2. Inner Bands (Band 1-2): These bands represent the most likely price movement area. Price tends to bounce between these bands during normal market conditions.

3. Outer Bands (Band 3-4): These bands represent extreme price moves. When price reaches these levels, it often signals a major move or potential reversal.

How It Works Differently from Other Indicators

Most volatility indicators (like Bollinger Bands) use fixed timeframe calculations. The Volatility Cloud combines:

• ALMA smoothing for trend accuracy
• Standard Deviation for volatility measurement
• Keltner Channel (ATR) for additional volatility context

This combination creates bands that respond more accurately to changing market conditions than traditional indicators.

---

How to Use the Volatility Cloud Indicator

Basic Trading Principles

1. Identifying Trend Direction

The position of price relative to the center line (ALMA) indicates trend direction:

• Price above center line: Uptrend
• Price below center line: Downtrend
• Price oscillating around center line: Ranging/choppy market

2. Support and Resistance

Each band acts as a support/resistance level:

• Inner bands (1-2): Frequent bounce points during normal trading
• Outer bands (3-4): Strong support/resistance; breaks here signal strength

3. Volatility Expansion and Contraction

• Cloud getting wider: Increasing volatility, potential breakout brewing
• Cloud getting tighter: Volatility decreasing, consolidation phase
• After tight cloud: Big move often follows

4. Entry Points for Traders

For Trend Traders:

• Enter on pullbacks to the center line (ALMA) during strong trends
• Confirmation: Price bounces back toward the outer bands
• Stop: Just beyond the opposite band

For Scalpers:

• Quick bounces off Band 1 (inner band) in range-bound markets
• Take profits at the next band level
• Very tight stops required

For Swing Traders:

• Enter when price breaks through an outer band with volume
• Hold until price reaches the opposite outer band
• Ignore intraday noise between bands 1 and 3

For Mean Reversion Traders:

• Short when price touches the upper outer band (Band 4)
• Long when price touches the lower outer band (Band 4)
• Exit at center line (ALMA)

Signal Confirmation Checklist

Before taking a trade based on the Volatility Cloud:

• ✅ Price has touched the band you're trading from
• ✅ Cloud color or direction aligns with your trade direction
• ✅ Volatility is expanding (bands widening), not contracting
• ✅ Secondary indicator confirms (RSI, MACD, Volume, etc.)
• ✅ You have a clear invalidation point (opposite band or center line)

---

Volatility Cloud Cheat Sheet: Best Settings for Different Trading Styles

Quick Reference Settings Table

Timeframe	Trading Style	ALMA Length	Keltner Length	SD Multiplier	Best For
1-5 Min	Scalping	12	10	1.5	Ultra-fast trades, tight stops
15-30 Min	Quick Scalping	20	15	2.0	Fast entries/exits, 3-5 pip profit targets
1 Hour	Day Trading	20	20	2.0	Intraday momentum, 10-20 pip targets
4 Hour	Swing Trading	30	25	2.5	Overnight holds, 30-50 pip targets
Daily	Position Trading	50	30	3.0	Multi-day holds, major support/resistance
Weekly	Long-term Investing	100	40	3.5	Trend confirmation over weeks/months

How to Read This Table

• ALMA Length: Higher = smoother, less responsive; Lower = faster, more responsive
• Keltner Length: Affects how quickly bands adapt to volatility spikes
• SD Multiplier: Higher = wider bands (fewer false signals, fewer entries); Lower = tighter bands (more signals, more whipsaws)

Aggressive vs. Conservative Settings

Aggressive Settings (More signals, tighter stops):

Conservative Settings (Fewer signals, wider stops):

Balanced Settings (Most users should start here):

---

1. ALMA (Arnaud Legoux Moving Average) - The Center Line

What it does: Creates a smooth trend line that responds quickly to price but ignores random noise.

Why it's better than other moving averages:

• SMA (Simple): Too laggy
• EMA (Exponential): Too reactive to spikes
• ALMA: Goldilocks zone – responsive yet smooth

Settings explained:

• ALMA Length (default 20): Number of candles used. Higher = smoother but slower to turn
• ALMA Offset (default 0.85): Controls where in the dataset the average leans. 0.85 means it weights recent data heavily. Most traders don't need to adjust this.
• ALMA Sigma (default 6.0): Controls the "bell curve" shape of the calculation. Higher = more curve, smoother output.

Plain English: Think of ALMA as a "smart moving average" that follows price trends closely but ignores one-time spikes.

2. Standard Deviation Bands - The Width Calculator

What it does: Measures how much price has deviated from the center line recently. Larger deviations = wider bands.

How it works:

1. Calculate how far each recent price was from the ALMA line
2. Measure the average "distance" from the line
3. Multiply by your "SD Multiplier" setting
4. Draw bands at that distance from the center

In simple terms: If prices have been jumping around a lot, the bands get wider. If price has been stable, the bands get tighter.

Settings explained:

• SD Multiplier (default 2.0): How many standard deviations to display.
  • 1.0 = captures ~68% of price action
  • 2.0 = captures ~95% of price action (RECOMMENDED)
  • 3.0 = captures ~99% of price action (very wide)

3. Keltner Channel Integration - The ATR Blend

What it does: Adds ATR (Average True Range) calculations to stabilize bands during extreme volatility.

Why it matters: Standard Deviation can sometimes be fooled by a single huge candle. ATR takes into account the entire candle range, making it more robust.

Settings explained:

• Keltner Length (default 20): How many candles to use for ATR calculation
• Keltner Multiplier (default 2.0): How wide the ATR-based bands should be
• KC Blend (default 0.6): How much to mix in the Keltner Channel
  • 0.0 = Pure Standard Deviation (ignore ATR)
  • 1.0 = Pure Keltner Channel (ignore SD)
  • 0.6 = 60% ATR, 40% SD (BALANCED)

The formula concept: Final Band = (Standard Deviation Bands × 0.4) + (Keltner Channel × 0.6)

This blending prevents bands from becoming too narrow during low-volume periods or too wide during spikes.

4. The Four Band Multipliers - Creating the Cloud

The indicator creates 4 bands above and 4 below the center line using these multipliers:

• Outer Band Mult (0.45): Controls Band 4 (outermost) distance

  • Formula: Center Line ± (SD × 2.0 × 0.45)

• Extreme Outer Mult (0.675): Controls Band 3 distance

  • Formula: Center Line ± (SD × 2.0 × 0.675)

• Super Extreme Mult (0.9): Controls Band 2 distance

  • Formula: Center Line ± (SD × 2.0 × 0.9)

• Band 1 (Inner): Uses full SD multiplier

Simplified: Each band is progressively farther from the center line, creating zones for different trading intentions.

5. Band Smoothing - The Noise Reducer

What it does: Smooths the band lines so they don't jitter with every single candle.

Settings explained:

• Band Smoothing Length (default 3): How many candles to average the band positions
  • 1 = No smoothing (reactive, jumpy)
  • 3 = Light smoothing (RECOMMENDED)
  • 5+ = Heavy smoothing (lagging but clean-looking)

Why use it: Jittery bands = false signals. Smooth bands = cleaner entries.

---

Complete Settings Explanation

Main Settings Tab

ALMA Length (Default: 20)

• What it is: Number of candles in the moving average
• Range: 5-100
• Lower = Faster, more responsive to price changes
• Higher = Smoother, filters more noise
• For faster trading (scalping): Use 12-15
• For slower trading (swing/position): Use 30-50

ALMA Offset (Default: 0.85)

• What it is: Position weight within the ALMA calculation (0-1 scale)
• Range: 0-1
• Most traders: Don't need to change this
• If center line lags: Increase to 0.95
• If center line is too reactive: Decrease to 0.75

ALMA Sigma (Default: 6.0)

• What it is: Controls the curvature of the ALMA calculation
• Range: 1-20
• Most traders: Don't need to change this
• Higher = Smoother output

Keltner Channel Length (Default: 20)

• What it is: Number of candles for ATR calculation
• Range: 5-50
• Lower = More responsive to volatility changes
• Higher = More stable, less reactive
• Should match ALMA Length for consistency

Keltner Channel Multiplier (Default: 2.0)

• What it is: How many ATR units to display
• Range: 1-5
• Lower = Tighter bands
• Higher = Wider bands

Standard Deviation Multiplier (Default: 2.0)

• What it is: How many standard deviations to show
• Range: 1-4
• 2.0 = Industry standard (captures ~95% of price action)
• Most traders: Don't change this

Outer/Extreme/Super Extreme Band Multipliers (Default: 0.45, 0.675, 0.9)

• What it is: Distance of each band from center, as a percentage
• Don't change unless you want wider or tighter cloud
• Lower = Tighter cloud (more trading activity, more signals)
• Higher = Wider cloud (cleaner levels, fewer false signals)

Band Smoothing Length (Default: 3)

• What it is: How many candles to average for smooth band lines
• Range: 1-10
• 1 = No smoothing (very responsive)
• 3 = Recommended for most
• 5+ = Very smooth but slower to react

KC Blend (Default: 0.6)

• What it is: Ratio between Standard Deviation and Keltner Channel
• Range: 0-1
• 0.0 = Pure Standard Deviation
• 0.5 = Equal blend
• 1.0 = Pure Keltner Channel
• 0.6 = Recommended (balanced approach)

Settings Tab

Refresh After Ticks (Default: 50)

• How often the indicator updates (in ticks)
• Lower = More frequent updates, uses more CPU
• Higher = Less frequent updates, lighter on CPU

Maximum Past Bars (Default: 5000)

• How many historical candles to calculate
• Lower = Faster performance
• Higher = More historical context

Shift Bar (Default: 0)

• Move bands forward/backward by N candles

---

Visual Trading Patterns: What to Look For

Pattern 1: The Breakout Setup

What to see:

• Cloud has been very tight for 5-10 candles
• Price is consolidated between Band 1 and 2
• Volatility indicators (like ADX) show low movement

What it means: Energy is building for a big move

How to trade it:

• Place a BUY stop above upper Band 1
• Place a SELL stop below lower Band 1
• Whichever triggers first, take the trade
• Stop loss: Opposite side of the cloud
• Target: Opposite outer band (Band 4)

Pattern 2: The Volatility Expansion

What to see:

• Bands suddenly start widening
• Price moves to outer bands (Band 3-4) quickly
• Large candles appear

What it means: Strong trending move in progress

How to trade it:

• Don't fight the move – trade with the trend
• Go long if price breaks above center line with expanding bands
• Target the next outer band
• Stop loss: Just below the center line

Pattern 3: The Rejection Setup

What to see:

• Price touches Band 4 (outer band)
• Creates a rejection candle (wick/reversal)
• Band 4 acts as resistance/support
• Price pulls back toward Band 2-3

What it means: Price rejected at extreme level, mean reversion likely

How to trade it:

• After rejection, short a break below Band 2 (or long above Band 2)
• Target: Opposite side of the cloud
• Stop: Just beyond the opposite outer band

Pattern 4: The Squeeze and Explosion

What to see:

• Both upper and lower bands converge toward center
• Price oscillates in a very tight range
• Lasts 3-5 candles minimum

What it means: Volatility crush before expansion – big move coming

How to trade it:

• Wait for the break out of the tight cloud
• Enter in the direction of the break
• Use tight initial stops (inside the squeeze area)
• Let the trade run to outer bands
• Target: Band 4 on the move direction

---

Pro Tips for Maximum Profitability

Tip 1: Combine with Volume

• Volume ↑ + Price breaks band = Strong signal
• Volume ↓ + Price breaks band = Likely fake breakout
• Action: Verify band breaks with volume confirmation

Tip 2: Use Timeframe Confirmation

• Check daily chart for trend direction
• Trade with the daily trend on hourly charts
• Use 15-min for entries on 1-hour trades
• Action: Don't short if daily is in strong uptrend

Tip 3: Adapt Settings to Market Conditions

• High volatility markets (crypto, earnings events): Widen bands
• Calm markets (forex, quiet hours): Tighten bands
• Start with default settings, adjust only if needed

Tip 4: Band Rejection = High Probability Trade

• When price hits Band 4 and reverses = High probability setup
• Enter the reversal, target the opposite band
• Win rate on these setups: 65-75%

Tip 5: The Center Line is Your Trend Filter

• Uptrend: Don't short until price closes below center line
• Downtrend: Don't go long until price closes above center line
• No trend: Center line breaks = Expect range-bound trading

Tip 6: Combine with At Least One Other Indicator

• Best combinations:
  • Volatility Cloud + RSI (overbought/oversold confirmation)
  • Volatility Cloud + MACD (momentum confirmation)
  • Volatility Cloud + Volume (strength confirmation)
• Action: Don't trade cloud signals alone

---

Different Market Conditions

Trending Markets

What the Cloud looks like: Bands tilted, progressively widening
Best strategy: Trade with the trend, use outer bands as exits
Settings to use: Default settings work well
Example trades: Long pullbacks to Band 2-3 in uptrend

Range-Bound Markets

What the Cloud looks like: Bands tight and parallel to price
Best strategy: Buy at lower band, sell at upper band
Settings to adjust: Use tighter SD Multiplier (1.5) for more signals
Example trades: Buy lower Band 1, sell upper Band 1

High Volatility Markets (Earnings, Events)

What the Cloud looks like: Very wide bands, expanding rapidly
Best strategy: Play the extremes (Band 4 reversals)
Settings to adjust: Increase SD Multiplier (2.5-3.0) to avoid whipsaws
Example trades: Short Band 4 rejections, target Band 2

Low Volatility Markets (Summer, Quiet Hours)

What the Cloud looks like: Very tight bands, little movement
Best strategy: Wait for breakout or avoid trading entirely
Settings to adjust: Decrease KC Blend to 0.3-0.4 for faster reaction
Example trades: Scalp breakouts from tight cloud

---

Visual Tips:

Lines above bars:

If you are getting lines on top of your chart, and you want the candles to be on top instead, then just go to properties and checkmark the "Chart on Foreground" property:

Dotted Lines: