GARCH Range Predictor

This was inspired by deltatrendtrading's video on GARCH models to predict daily trading ranges and identify favorable trading conditions. Based on advanced volatility forecasting techniques, it predicts whether a trading day's true range will exceed a threshold, helping traders decide when to trade or skip a session.

Key Features


GARCH(1,1) Volatility Modeling: Uses log-transformed true ranges with exponential moving average centering

Forward-Looking Predictions: Makes predictions at session start before the day unfolds

Dynamic or Static Thresholds: Choose between fixed dollar thresholds or adaptive 20-day averages

Accuracy Tracking: Monitors prediction accuracy with overall and recent (20-day) hit rates

Visual Session Boxes: Colors trading sessions green (trade) or red (skip) based on predictions

Real-Time Statistics: Displays current predictions, thresholds, and performance metrics

How It Works


Data Transformation: Log-transforms daily true ranges and centers them using an EMA

Variance Modeling: Updates GARCH variance using: σ²ₜ = ω + α(residual²) + β(σ²ₜ₋₁)

Prediction Generation: Back-transforms log predictions to dollar values

Signal Generation: Compares predictions to threshold to generate trade/skip signals

Performance Tracking: Validates predictions against actual outcomes

Parameters

GARCH Parameters (ω, α, β): Control volatility persistence and mean reversion

EMA Period: Smoothing period for log range centering

Threshold Settings: Static dollar amount or dynamic multiplier of recent averages

Session Time: Define regular trading hours for analysis

Best Use Cases


Breakout and momentum strategies that perform better on high-range days

Risk management by avoiding low-volatility sessions

Futures day trading (optimized for MNQ/NQ detection)

Any strategy where daily range impacts profitability

Important Notes


Requires 5+ sessions for initialization and warm-up

Accuracy depends heavily on proper parameter tuning for your specific instrument

Default parameters may need adjustment for different markets

Monitor the hit rate to validate effectiveness on your timeframe