📚 Documentation
WaveNodes Volatility Meter
v1.04 AI EditionProfessional volatility analysis tool for options traders and market timing decisions
Getting Started
📈 Your Learning Journey
Follow this structured path to master WaveNodes Volatility Meter:
- 1Foundation: Understand core concepts (10 min)
- 2Installation: Get Volatility Meter running on TradingView (5 min)
- 3Features: Explore each module (20 min)
- 4Practice: Apply in real trading scenarios (ongoing)
🎯 What You'll Learn
By the end of this guide, you'll be able to:
- Read and interpret volatility levels at a glance
- Understand the PEC line and its significance for breakouts
- Identify bullish and bearish phases of price action
- Use the Analytics Dashboard for quick decision-making
- Respond to trap alerts and big move warnings
- Time your options trades based on volatility conditions
- Make better entry and exit decisions with volatility insights
Step 1: Accept License Agreement
Before using WaveNodes Volatility Meter, you must accept the comprehensive license agreement. This includes terms of service, risk disclosure, and disclaimer available at wavenodes.com.
// "I have read and accept License Agreement, T&C, Risk Disclosure, and Disclaimer"
Step 2: Install on TradingView
- 1Log in to your TradingView account
- 2Open any chart you'd like to analyze
- 3Click on "Indicators" in the top toolbar
- 4Navigate to "Invite-only Scripts"
- 5Select "WaveNodes Volatility Meter" from the list
- 6Configure settings according to your trading style
💡 Pro Tip
Start with default settings and gradually adjust based on your experience. The default phase sensitivity of 50 is recommended for most traders.
WaveNodes Volatility Meter is built using Pine Script v5, ensuring compatibility with all TradingView charts and real-time data feeds.
Overview
WaveNodes Volatility Meter is a professional tool designed to help traders understand and leverage market volatility for better trading decisions. It provides three critical pieces of information that are especially valuable for options traders: current volatility levels, the PEC reference line for long-term volatility analysis, and the phase of price action (bullish or bearish).
Volatility Bars
Visual representation of current volatility levels - higher bars mean higher volatility
PEC Reference Line
Critical reference level to check volatility breakouts and assess long-term volatility trends
Phase Analysis
Color-coded phases - Blue (Bullish/Recovery) or Red (Bearish/Correction)
Trap Alerts
Beta feature alerting to possible buyer or seller traps - reduce exposure when active
Big Move Alert
Upcoming trend alert indicating a big move is coming - prepare for volatility expansion
Analytics Dashboard
Easy analytics dashboard showing all critical information in one place
⚠️ Important Note
WaveNodes Volatility Meter is a professional tool designed to help you make timed decisions, especially for options trading. Always use proper risk management and never risk more than you can afford to lose. Past performance does not guarantee future results. This indicator is for educational and informational purposes only.
Key Features
Volatility Bars
Volatility Bars provide a visual representation of current market volatility levels. Higher bars indicate higher volatility, while lower bars indicate calmer market conditions. This is crucial for timing entries and exits, especially for options traders.
🔵 Bullish Phase (Blue)
Indicates the market is in a bullish or recovery phase. Volatility bars are colored blue during this phase.
- • Look for buying opportunities
- • Consider long positions
- • Higher volatility may continue
- • Ideal for call options strategies
🔴 Bearish Phase (Red)
Indicates the market is in a bearish or correction phase. Volatility bars are colored red during this phase.
- • Look for selling opportunities
- • Consider short positions or hedging
- • Higher volatility may continue
- • Ideal for put options strategies
🔍 How Volatility Bars Work
Volatility Bars are generated by WaveNodes' proprietary volatility engine to reflect changing market activity in a clean, visual format:
- Automatically adapts to instrument behavior and selected timeframe
- Internally tuned for broad market conditions and active index environments
- Can display as histogram (default) or line (minimal interface)
- Color indicates phase (blue=bullish, red=bearish)
💡 Professional Trading Insight
Volatility bars are your pulse check for market activity. Here's how to use them professionally:
- Entry Timing: Enter trades when volatility is rising from low levels - momentum building.
- Exit Timing: Consider exiting when volatility is very high - potential exhaustion.
- Options Premiums: High volatility = expensive premiums, low volatility = cheap premiums.
- Volatility Contraction: Low bars often precede big moves - watch for breakout.
- Phase Alignment: Blue bars with rising volatility = strong bullish momentum.
PEC Reference Line
The PEC (Price Expansion Contraction) line is a critical reference level that helps you check for volatility breakouts and assess long-term volatility trends. It acts as a baseline for measuring whether current volatility is above or below normal levels.
📈 Rising Volatility (Red PEC)
When the PEC line is rising and colored red, volatility is increasing.
- • Indicates expanding volatility
- • Markets becoming more volatile
- • Options premiums may increase
- • Be prepared for larger moves
📉 Declining Volatility (Blue PEC)
When the PEC line is declining and colored blue, volatility is decreasing.
- • Indicates contracting volatility
- • Markets becoming calmer
- • Options premiums may decrease
- • Watch for low volatility breakout
🔍 How PEC Line Works
The PEC line is produced by a proprietary smoothing framework that represents the market's broader volatility baseline:
- Continuously tracks whether volatility is elevated or subdued versus recent behavior
- Uses adaptive smoothing to reduce noise while preserving meaningful shifts
- Color changes based on direction (red=rising, blue=falling)
- Can be hidden in settings for cleaner display
💡 Professional Trading Insight
The PEC line is your volatility anchor. Here's how professionals use it:
- Above PEC = High Volatility: Current volatility above PEC indicates elevated conditions - expensive options, wider stops.
- Below PEC = Low Volatility: Current volatility below PEC indicates calm conditions - cheap options, tight stops, watch for breakout.
- Crossing PEC = Breakout: Volatility bars crossing PEC often signal volatility breakout - big moves ahead.
- PEC Direction: Rising PEC = volatility trend is up (good for buyers), Falling PEC = volatility trend is down (good for writers).
- Long-term View: PEC provides long-term volatility context - compare current volatility to recent average.
Phase of Price Action
The Phase of Price Action determines whether the market is in a bullish or bearish phase, providing crucial context for your trading decisions. The phase is indicated by the color of volatility bars or the bottom bar in minimal interface mode.
🔵 Bullish / Recovery Phase
Market is in an uptrend or recovering from a decline. Volatility bars are colored blue.
- • Favor long positions
- • Look for buying opportunities
- • Use pullbacks as entry points
- • Focus on call options or bullish strategies
🔴 Bearish / Correction Phase
Market is in a downtrend or correcting from a rally. Volatility bars are colored red.
- • Favor short positions or hedging
- • Look for selling opportunities
- • Use rallies as exit points
- • Focus on put options or bearish strategies
🔍 Phase Sensitivity
The phase sensitivity setting allows you to adjust how quickly the phase changes based on price action:
- Default: 50 - Recommended for most traders
- Lower values (10-30): More sensitive - phase changes faster, more signals, more noise
- Higher values (60-90): Less sensitive - phase changes slower, fewer signals, less noise
- Recommendation: Don't change unless you're sure what you're doing
💡 Professional Trading Insight
Phase alignment is crucial for successful trading. Here's how to use it:
- Trend Following: Trade in the direction of the phase. Long in blue, short in red.
- Phase Changes: Phase changes are early reversal signals - wait for confirmation before acting.
- Weak vs Strong: Weak bullish (light blue) or weak bearish (light red) indicates transition - be cautious.
- Multi-Timeframe: Check phase on higher timeframes for major trend, lower timeframes for precise entries.
- Options Strategy: Blue phase = call options, red phase = put options, phase change = reversal strategies.
Easy Analytics Dashboard
The Easy Analytics Dashboard provides all critical volatility and phase information in one convenient location. It displays real-time status without requiring you to analyze different parts of the indicator.
Dashboard Components:
🚨 Big Move Coming
Appears when volatility is in a squeeze condition - low volatility about to expand. Prepare for a big move in either direction.
🎯 Trap Alert
Appears when there's possibility of buyer or seller trap. Keep exposure low when this alert is active.
📈 Options Phase: Rising Volatility
PEC line is rising - volatility is expanding. Good for option buyers, expensive premiums for writers.
📉 Options Phase: Declining Volatility
PEC line is falling - volatility is contracting. Good for option writers, cheap premiums for buyers.
💡 Professional Trading Insight
The Analytics Dashboard is your command center. Here's how to interpret it like a pro:
- Big Move + Low Volatility: Perfect setup for breakout traders. Wait for directional clue.
- Big Move + Trap Alert: Extremely cautious - big move may be false, traps common. Reduce exposure.
- Rising Volatility + Bullish Phase: Strong bullish momentum - ideal for call options or long entries.
- Declining Volatility + Bearish Phase: Weak bearish move - may be good for writing puts or short-term shorts.
- Premium Decay Warning: Appears when volatility is declining - option writers benefit, buyers lose.
- Reliability: High reliability means current phase/volatile reading is trustworthy. Low reliability = use caution.
Trap Alerts (Beta)
Trap Alerts notify you when there's a high probability of buyers or sellers getting trapped in reversal trades. This feature is in beta and appears in the volatility meter window, keeping it separate from the main price chart.
🚨 Buyer Trap
Warning that buyers may be trapped at current levels.
- • Price showing signs of reversal at highs
- • Momentum divergence detected
- • High probability of downside move
- • Consider exiting longs or reducing exposure
🚨 Sellers Trap
Warning that sellers may be trapped at current levels.
- • Price showing signs of reversal at lows
- • Momentum divergence detected
- • High probability of upside move
- • Consider covering shorts or going long
⚠️ How Trap Alerts Work
Trap Alerts are generated by a proprietary trap-detection model that identifies conditions where directional entries are vulnerable to reversals:
- Monitors momentum extremes and divergence patterns
- Detects when traders are likely entering at wrong levels
- Provides on-screen textual alerts when enabled in settings
- Appears in volatility meter window (not on price chart)
💡 Professional Trading Insight
Trap Alerts are your safety net. Here's how to respond to them professionally:
- Immediate Action: When trap alert appears, reduce position size or hedge existing positions immediately.
- Avoid New Entries: Do not enter new trades in the direction that might get trapped.
- Consider Reversal: Trap alerts often precede reversals - look for opposite direction opportunities.
- Not Absolute: Trap alerts warn of risk, don't confirm direction - wait for additional confirmation.
- Options Trading: For options writers, trap alerts signal potential to benefit from reversal - consider opposite side strategies.
- Beta Feature: Still in development - use as additional confirmation, not primary signal.
Big Move Coming Alert
The Big Move Coming Alert notifies you when volatility is in a squeeze condition - very low volatility that typically precedes large price movements. This is critical information for options traders and breakout traders.
🔍 How Big Move Alert Works
This alert is triggered by a proprietary compression-expansion model that flags phases when volatility is abnormally compressed and likely to expand:
- Monitors structural tightening in volatility behavior around key reference conditions
- Flags squeeze states when compression reaches internally validated thresholds
- Alert appears in Analytics Dashboard when squeeze condition is active
- Indicates low volatility about to expand - big move imminent
💡 Professional Trading Insight
Volatility squeeze is one of the most powerful setups. Here's how to trade it:
- Prepare, Don't Predict: Set up your trade but wait for directional clue. Don't guess the direction.
- Breakout Entry: Enter on decisive breakout of a key level (support/resistance, zone, etc.).
- False Breakout: Be prepared for fakeouts. Wait for confirmation before adding to positions.
- Options Buyers: Straddle/strangle strategies work well when you can't predict direction.
- Options Writers: Avoid writing when big move is coming - high risk of being on wrong side.
- Stop Loss: Keep stops tight or use bracket orders - false breakouts are common.
Volatility Marker
The Volatility Marker is an optional feature that provides additional context about volatility conditions. It shows whether volatility is expanding or contracting and marks low reliability periods.
📈 Expanding Volatility
When volatility is consistently increasing over recent bars.
- • Indicates building momentum
- • Markets becoming more active
- • Options premiums rising
- • Good for trend following
📉 Contracting Volatility
When volatility is consistently decreasing over recent bars.
- • Indicates calming markets
- • Momentum fading
- • Options premiums falling
- • Watch for breakout
⚠️ Low Reliability Volatility
When enabled, the marker highlights periods of low reliability volatility:
- Marked with lighter, less saturated colors
- Indicates phase/volatile reading may not be reliable
- Use caution during these periods
- Wait for additional confirmation before trading
💡 Professional Trading Insight
Use the Volatility Marker to refine your timing:
- Expanding + Right Phase: Strong signal - enter trades in phase direction with confidence.
- Contracting + Wrong Phase: Fade signal - look for reversal opportunities.
- Low Reliability: Stay on sidelines or reduce position sizes significantly.
- Options Writers: Expanding volatility = avoid writing, Contracting volatility = good for writing.
- Options Buyers: Expanding volatility = expensive but momentum, Contracting volatility = cheap but may not move.
Settings
Customize WaveNodes Volatility Meter to match your trading style and preferences. Access these settings from the indicator settings panel in TradingView.
Minimal Interface
Toggle between histogram and line display. When enabled, shows volatility as a line and phase as bottom bar.
Theme
Choose between Dark and Light theme for better visibility.
Phase Sensitivity
Adjust how quickly the phase changes based on price action. Lower = more sensitive, Higher = less sensitive.
Show Volatility Marker
Display volatility expansion/contraction information with graphical markers.
Mark Low Reliability Volatility
Highlight periods when volatility readings may not be reliable.
Show Possible Trap (Textual) - Beta
Display trap alerts as textual labels in the volatility meter window.
Show Upcoming Big Moves Alert (Textual)
Display big move alerts as textual labels in the analytics dashboard.
Traditional Interface
Restore the traditional interface layout for users who prefer the previous version.
Trading Tips & Professional Insights
Maximize your trading success with these professional insights and strategies for using WaveNodes Volatility Meter effectively.
Core Trading Principles
1. Volatility is King for Options
Options prices are directly tied to volatility. Understanding volatility conditions is essential for options trading success. High volatility = expensive premiums, Low volatility = cheap premiums.
2. Trade with the Phase
Always align your trades with the current phase. Long in blue (bullish), short or hedge in red (bearish). Counter-phase trades are for experts only.
3. Respect the PEC Line
The PEC line is your volatility anchor. Use it to assess whether current volatility is above or below normal levels. It's critical for timing entries and exits.
4. Watch for Volatility Squeeze
Low volatility (Big Move Coming alert) often precedes large moves. Prepare your trade but wait for directional confirmation before entering.
Advanced Strategies
🎯 Volatility Breakout Strategy
Perfect for catching big moves after volatility squeeze:
- Wait for "Big Move Coming" alert (volatility squeeze)
- Identify key support/resistance levels
- Wait for decisive breakout in either direction
- Enter trade on breakout with tight stop
- Target projected move based on volatility expansion
📊 Volatility Reversion Strategy
For trading when volatility is extreme:
- Wait for very high volatility (bars well above PEC)
- Look for phase change or trap alert
- Enter in direction of phase change/reversal
- Target mean reversion to PEC level
- Quick exits - high volatility conditions change fast
🔄 Phase Momentum Strategy
Ride the momentum when phase aligns with volatility:
- Wait for phase change (e.g., red to blue)
- Confirm with PEC direction (rising volatility for blue)
- Enter trade in phase direction
- Exit when phase changes or volatility contracts
- Use trailing stops to lock in profits
Options Trading Special Tips
📝 For Options Writers
- • Write options when volatility is high (above PEC) and falling
- • Avoid writing when "Big Move Coming" alert is active
- • Blue phase with declining volatility = good for writing puts
- • Red phase with declining volatility = good for writing calls
- • Use trap alerts to identify potential reversals for writing
- • Watch for premium decay warning - optimal for writers
📈 For Options Buyers
- • Buy options when volatility is low (below PEC) and about to expand
- • Wait for "Big Move Coming" alert before buying
- • Blue phase with rising volatility = good for buying calls
- • Red phase with rising volatility = good for buying puts
- • Avoid buying when volatility is very high and falling
- • Use trap alerts to time entry for reversal trades
🎯 Expiry Day Strategies
- • Volatility is highest on expiry day - expect large swings
- • PEC line reference is critical - premiums gravitate to it
- • Use 1-minute timeframe for precise timing
- • Phase changes are rapid - stay alert
- • Trap alerts are very important - reversals common
- • Consider straddle/strangle if direction is unclear
Common Mistakes to Avoid
❌ Ignoring Trap Alerts
Trap alerts are there to protect you. Respect them - reduce exposure or hedge when they appear.
❌ Trading During Low Reliability
When volatility readings show low reliability, stay on sidelines or reduce position sizes significantly.
❌ Predicting Big Move Direction
Don't guess the direction when "Big Move Coming" alert appears. Prepare, but wait for directional confirmation.
❌ Writing Before Volatility Squeeze
Avoid writing options before volatility squeeze - big move can wipe out your position. Wait after expansion.
❌ Ignoring Phase Changes
Phase changes are early reversal signals. Don't fight them - adjust your positions accordingly.
❌ Changing Phase Sensitivity Without Knowledge
Default sensitivity of 50 works best. Don't change unless you understand the implications thoroughly.
Timeframe Guidelines
⚡ Scalping (1-5 min)
- • Phase changes are rapid
- • Focus on volatility spikes
- • Quick entries/exits
- • PEC line still valid reference
- • High frequency trading
📊 Day Trading (5-15 min)
- • Most versatile timeframe
- • Volatility squeeze key setup
- • Phase momentum works well
- • PEC breaks are significant
- • Best for options trading
📈 Swing Trading (15min-4hr)
- • Focus on phase changes
- • PEC direction important
- • Longer volatility cycles
- • Multiple targets
- • Lower noise
🎯 Position Trading (Daily+)
- • Long-term phase trends
- • PEC as major reference
- • Volatility cycles longer
- • Wide stops
- • Patience required
Release Notes
Version 1.04 (Build 155)
Current🆕 Major Updates
- • Added trap alert module (beta) - in sync with WaveNodes Trap Alert Module but shows alert in volatility meter window
- • Added Upcoming Trend Alert - big move coming notification
- • PEC line now shows in different colors when rising (red) or falling (blue)
- • Introduced Easy Analytics Dashboard
- • Option to restore traditional interface for users who loved previous version
- • Default settings for minimal interface set to FALSE
- Steps increments changed from 10 to 5 for phase sensitivity
- Improved user interface and visualization
Important Disclaimer
⚠️ Stock Market Investment Risks
This documentation and the WaveNodes Volatility Meter indicator are for educational and informational purposes only.
🚫 No Financial Advice
WaveNodes Volatility Meter does not provide investment advice, financial advice, trading advice, or any other type of advice. The information contained herein is not intended to be and does not constitute financial advice, investment advice, trading advice or any other type of advice.
📊 Past Performance
Past performance of any trading strategy or indicator does not guarantee future results. Trading involves substantial risk of loss and is not suitable for all investors.
🇮🇳 Market Regulations
This indicator is designed for use across global markets through TradingView. Users should ensure compliance with local regulatory requirements, SEBI regulations, individual broker policies, and applicable laws.
⚖️ User Responsibility
By using WaveNodes Volatility Meter, you acknowledge and agree that:
- • You are solely responsible for your investment decisions
- • You understand the risks involved in trading
- • You will not hold WaveNodes or its creators liable for any losses
- • You have adequate knowledge and experience in trading
- • You will seek professional advice when needed
🎯 Developing Your Own Strategy
The best approach is to develop your own trading strategy based on thorough analysis, depending on your preferred trading style and risk tolerance.
WaveNodes Volatility Meter provides analytical tools and insights, but successful trading requires personal research, back-testing strategies across different market conditions, defining clear risk parameters, aligning with your preferred timeframe, continuous learning and refinement, and combining technical analysis with fundamental factors.
Remember: No single strategy works for all market conditions or all traders. What works for one person may not work for another.
🔒 Risk Warning
Trading and investing in financial markets involves significant risk of loss. Never invest money you cannot afford to lose. Always do your own research and due diligence.
Last updated: Nov 19, 2025
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