Volatility Stop indicator is a stop level by volatility based on the article "10 Selling Tips" by Thomas Bulkowski.

It has two configurable parameters:

  • Period - calculation period
  • Multiplier - ratio of the line deviation from the price

Calculation:

VS = Multiplier * HiLoAvg / Close

where: 

HiLoAvg = MAH - MAL
MAH - SMA(High,Period)
MAL - SMA(Low, Period)

It can be used with the Volatility Stop Oscillator indicator.

By default, the indicator line is displayed below the price (Multiplier = 2):

To draw a line above the price, you should enter a negative coefficient value (Multiplier = -2):

The indicator can also be used to create a volatility channel by applying two indicators with different Multiplier values to a chart.

For example, you may use 0.618 for the lower line and -0.618 - for the upper one and trade when the lines of the obtained channel are broken.