Sign inCreate account
← Strategy library

Volatility Regime Switchtrend when it is quiet, fade when it is loud

Evidence: WeakProfessionalVolatility · Regime

A tempting idea: measure the volatility regime, and run a trend strategy in one regime and a mean-reversion strategy in the other. Two books of this library, switched by one number.

It is in the library because people ask for it and because the reasoning is not stupid. It is rated Weak because the evidence for the switch is much thinner than the evidence for either strategy on its own, and because every version of it has a parameter that decides everything — the threshold — which is exactly where results get fitted to the past.

Read this one as a research direction rather than a finished method.

Category
Volatility · Regime
Timeframe
H4 regime · H1 execution
Suitable pairs
EURUSD · USDJPY · XAUUSD
Session
London and New York
Indicators / tools
ATR(14) against its own 100-bar median · ADX(14) · EMA(50)

Valid setup

VL-06 · VOLATILITY REGIME SWITCH — VALID SETUP USDJPY · H1 · the ATR is under its own median, so the quiet-regime rule applies and this is a continuation trade LONG 148.01 148.30 148.58 148.86 149.14 149.42 149.70 trailed on the EMA(50) 1R EMA(50) — the pullback target in the quiet regime ENTRY = pullback holds, quiet-regime rule STOP = 1.0 × ATR(14) beyond the pullback low 1 2 3 148.92 148.61 ATR(14) — below its own 100-bar median means QUIET, above means LOUD ① Regime read at the H4 close: ATR under its median ② So the QUIET rule set is live — continuation, not fade ③ Price pulls back to the EMA(50) and holds ④ Enter on the hold, stop 1 × ATR beyond the low ⑤ Trail the EMA(50) — no fixed target here ⑥ Close everything if the regime flips

Exact rules

Entry

  • Regime test at every H4 close: ATR(14) below its 100-bar median is the quiet regime, above is the loud regime.
  • Quiet regime — trade continuation: enter on a pullback to the EMA(50) in the direction of the H4 trend.
  • Loud regime — trade reversion: enter against a two-ATR excursion from the EMA(50), only when the ADX is below 25.
  • Never hold a position through a regime change. Close it and re-assess; a trade taken under one rule set cannot be managed under the other.

Stop loss

  • Quiet regime: 1.0 × ATR(14) beyond the pullback extreme.
  • Loud regime: 1.5 × ATR(14) beyond the excursion extreme. Wider, because a loud market will retest.
  • Risk 0.5% either way.

Take profit / exit

  • Quiet regime: trail the EMA(50). These are the trades worth holding.
  • Loud regime: the EMA(50) itself, as a fixed target. Do not trail a reversion trade.
  • Both: flat before the regime is re-tested at the next H4 close if the trade has not moved.

Build Volatility Regime Switch

Reading this page is free and always will be. Taking it is what costs — the complete MQL5 for the rules above, yours to keep, permanently. Five of them cost $10 and they never expire.

Sign inWhat it costs

More from Volatility

Volatility Contraction Breakoutthe range narrows, then gives waySqueeze ReleaseBollinger bands inside the Keltner channelATR Expansion Continuationjoin the bar that broke the quiet

Trading carries risk and most retail accounts lose money. Nothing on this page is financial advice or a recommendation to trade. The chart is an illustration of the rules on constructed candles — it is not a record of a trade and not a backtest.