What is Volatility Zero Trend Close-to-Close?
Volatility Zero Trend Close-to-Close is the classic close-to-close volatility estimate with one change. The ordinary version measures how widely log returns spread around their own average over the window; this one measures them around zero. A window that moved steadily in one direction keeps that move in the reading instead of having it subtracted as the expected return. The result is scaled to a year and plotted in its own pane.
It uses only the close, so it cannot see how far price travelled inside a bar. It describes past variation and does not show direction or forecast future moves.
How to use Volatility Zero Trend Close-to-Close
- Rising line. Bar-to-bar moves have become larger, whether they were back-and-forth or all in one direction.
- Falling or low line. Bar-to-bar moves are getting smaller. The market is quietening.
- Reading the number. The value is a fraction of price per year, not a percentage. A reading of 0.6 means about 60% annualised volatility.
- The gap to the ordinary estimate. This line never reads below Volatility Close-to-Close with the same settings. The difference between them comes from the window's average return, so a wide gap marks a strong one-way move.
These are ways to read volatility, not entry signals on their own.
Settings
| Setting | Default | What it changes |
|---|---|---|
| Length | 10 | Log returns in the window. Shorter reacts sooner and is noisier; longer is steadier and later. Minimum 1. |
| Days Per Year | 252 | The number of bars treated as one year when annualising. 252 is a trading-day count; crypto trades every day, so 365 is the natural figure on a daily chart of a crypto market. It only rescales the line. From 1 to 100000. |
Adjust the window and the annualisation factor in the indicator settings.
Calculation
Each bar's log return is squared, the squares are averaged over the window, and the result is annualised:
r = ln(close / previous close)
vol = sqrt( (sum of r^2 over the last 10 bars) / 10 * 252 )Nothing is subtracted from the returns before squaring, which is the whole difference from the ordinary estimate. Over a short window the average return is mostly noise, and removing it pulls the ordinary estimate down for no good reason. Over a long window a real drift is worth removing, and the ordinary estimate is the better fit.
Squared returns average to the ordinary variance plus the square of the average return, so this line sits at or above the ordinary one, with the gap widest during a strong one-way move. The first bar has no previous close and so no return; the line starts once Length returns are available.
The annualisation assumes each bar is one of the Days Per Year periods. On a daily chart that holds; on an hourly chart the absolute level is not a true annual figure, although its shape over time is still useful.
Limitations
- Trend and volatility are mixed. A steady rally with small, even bars can read as volatile as a choppy range, because the reading cannot tell drift from noise.
- It ignores the inside of the bar. A bar that swings wildly but closes near the previous close counts as calm.
- The annual figure depends on settings and timeframe. The default of 252 suits a market with weekends off, and the scaling is right only when each bar is one Days Per Year period.
- The live candle moves. The current bar's close and return change until that bar closes.
- It is not a strategy. It measures volatility. It gives no entry, exit, sizing or risk management on its own.
Frequently asked questions
It is an annualised volatility estimate built from the log returns between closes, measured around zero rather than around the window's average return. It counts a steady trend as part of volatility instead of treating it as expected and removing it.
It suits short windows, where the average return over a handful of bars is mostly noise and subtracting it understates volatility. Over long windows, where a drift is real, the ordinary close-to-close estimate is the more appropriate one. Plotting both shows how much of the movement was trend.
Yes. The indicator declares two inputs: Length, default 10 with a minimum of 1, and Days Per Year, default 252, from 1 to 100000. Open the indicator's settings on the chart to change them. For a daily crypto chart, 365 matches a market that trades every day.
No. Each value uses only that bar and the ones before it, so values on closed bars are not revised. The current candle's reading moves while that candle is live and settles when it closes.
The average of squared returns equals the ordinary variance plus the square of the average return. The second part is never negative, so this estimate can only match or exceed the ordinary one on the same data.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in Volatility Zero Trend Close-to-Close already applied. On any other market, open the indicator picker on the chart and choose Volatility Zero Trend Close-to-Close from the Volatility group.