The Volatility (VOLA) indicator, developed by Marc Chaikin, measures the trading range between an instrument’s high and low for each period. The Exponential Moving Average of the difference between the period’s high and low is first calculated (instead of the traditional period close). Then the Rate of Change of that moving average is taken, which represents an oscillator that measures volatility. A positive result indicates increasing volatility, whereas negative values signals decreasing volatility.
The formula for Chaikin’s Volatility (VOLA) is:
The Volatility (VOLA) indicator is a lower technical study. ProSticks uses the default parameter of 10 bars to calculate Volatility.
Traders tend to associate increased volatility with market tops as investors become indecisive and decreased volatility is usually associated with market bottoms as investors are on the sidelines.