An indicator that plots the ratio of True Range to Expected Move for SPX, helping traders understand market volatility and potential price movements through color-coded bars.
Explore complementary indicator rolesHow it works
The indicator calculates the True Range by measuring the high-low range of a period and compares it to the Expected Move, which predicts potential price changes based on implied volatility. It generates color-coded bars to represent the relationship between actual price movement and predicted volatility, with red bars indicating the true range was below the expected move and green bars showing it was above.
The Expected Move is derived from various volatility indexes, providing traders with a visual representation of market dynamics. The default color transition threshold can be adjusted in the settings, allowing for customization of the indicator's sensitivity to market movements.
Why it may be useful
This indicator helps traders understand the relationship between actual price movements and market expectations, offering insights into potential volatility and market behavior. By highlighting discrepancies between predicted and actual price ranges, it provides a valuable tool for assessing market sentiment and potential trading opportunities.
The color-coded bars can help traders identify periods where markets might be overpricing or underpricing volatility, which is particularly useful for options trading strategies. Understanding these nuances can improve risk management and help traders make more informed decisions about potential market movements.
When to explore it
The indicator is most effective when trading SPX or SPY options, as it provides specific insights into market volatility and expected price movements. Traders can use it to identify periods where selling option premium might be more profitable, typically during clusters of red bars that suggest lower actual volatility compared to market expectations.
It is particularly useful on daily charts, where traders can analyze color patterns and clusters to gain a deeper understanding of market dynamics. The indicator can help traders assess potential entry and exit points, especially when combined with other technical analysis tools and market context.
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What we’ve verified
Access, alerts and repainting behaviour have not been independently verified for this indicator. Check the creator’s current publication and settings.
General descriptions and classifications are recovered research. Verified details above identify the specific checks we have completed. Check the creator’s current publication for later changes.
![Expected Move Plotter [CHE] chart preview](https://s3.tradingview.com/r/rzERm04c.png?v=1676203952)
