TSIM Volatility Weather Model

The Volatility Weather Model is an indicator that delivers a unified "weather report" on market volatility by averaging 10 specialized estimators into actionable insights. It helps traders gauge price swing intensity, anticipate regime shifts, and align strategies with current market conditions—turning volatile environments into opportunities rather than hazards.


How Traders Can Use This Indicator

Focus on volatility as a leading signal for risk and opportunity:


- Spotting Expansions and Compressions: High readings (>70% or Z>1) indicate expanding volatility—ideal for breakouts or trend-following in active regimes, but scale back positions to avoid whipsaws in ranging ones. Low readings (<30% or Z<-1) signal compression; accumulate positions gradually, as these often precede explosive moves (e.g., enter calls/puts pre-earnings when the dashboard predicts "major breakout setup").

- Risk Management: Rely on the risk filter and behavioral alerts to adjust sizing—cut leverage in "high risk" phases (e.g., implement trailing stops at 1-2% risk per trade) and increase it in "low risk" for higher conviction setups. The cycle behavior helps time cycles: "Late expansion" warns of reversals, prompting profit-taking.

- Regime-Based Strategies: In trending regimes (fast EMA > slow), use high volatility for momentum trades (e.g., buy dips on pullbacks with tight stops). In cash regimes, exploit mean reversion—short extremes when the expected behavior flags "volatility mean reversion likely imminent."

- Multi-Timeframe Application: Day traders: Short lookbacks (20-40 bars) for intraday swings, watching bar colors for quick entries/exits. Swing traders: Longer periods (50-200) to filter noise, combining with support/resistance. For portfolios, scan multiple assets; if averages cluster high, hedge overall exposure.

- Scenario Examples:
- Bull Market Rally: If structure behavior shows "Trending with expanding volatility," add to winners but watch for "extreme" statuses signaling pullback risks.

- Sideways Consolidation: Low volatility + ranging regime = patience mode; use "deep compression" alerts to position for volatility spikes.

- News/Event Trading: Pre-event, low readings build setups; post-event, monitor averages—if Z>1.5, fade overreactions per the predictive insights.



Key Features for Practical Use


- Dual Display Modes (Normalized or Z-Score): Switch between percentile rankings (0-100%) for quick intensity checks or standard deviation scores for spotting statistical extremes. Use Normalized for broad overviews (e.g., 80% signals "hot" markets) and Z-Score for precise deviation alerts (e.g., +2σ warns of overextension).

- Average Line and Regime Filters: The core trend line shows consensus volatility; overlay fast/slow EMAs to identify "ACTIVE" (trending, above slow EMA) vs. "CASH" (ranging, below). Risk flags color bars/backgrounds (purple for high risk, aqua for low) to signal when to dial up or down exposure.

- Dashboard Table: A customizable table (position/size adjustable) lists individual estimators with statuses (e.g., "Extreme," "Low") and five behavioral summaries: Volatility Phase, Structure, Risk, Cycle, and Expected Behavior. These narratives provide instant guidance, like "High risk phase—reduce exposure" or "Breakout setup developing."

- Visual Alerts: Gradient fills, reference lines (e.g., 50% midline, ±1σ), and optional plots highlight thresholds. Toggle smoothing and line widths for cleaner charts in real-time trading.