The "Power Index" indicator is our approach to measuring the volatility of an asset. It comes with multi-timeframe support, which helps to filter out bad trades. The indicator has a "Sensitivity" parameter that specifies how many historic candles should be looked at when calculating. The graph is a cloud colored according to historical volatility. This makes it possible to estimate at a glance how much risk and volatility currently prevail in the market.
The "Power Index" is part of our holistic approach to identifying trading setups. It should always be used in conjunction with the other dize indicators.
By using the integrated settings you will be able to configure the power index for your market. Firstly, you should find the "Sensitivity" which best reflects your markets volatility . If you wish, you can also use the indicator on a different timeframe, than the one displayed on your chart. That can help to filter out noise and get a better perspective on what is happening on a bigger timeframe.
Let's have a look how we can use the Power Index to filter out noise on a lower timeframe:
In the above picture, both chart and power index run on the same timeframe. The Power Index calculates according to the selected timeframe and gives solid information.
If we zoom out on the power index by selecting a higher timeframe, we get the big picture and can easily identify low volatility, which might increase our chances on finding a good trading setup.
The above example is one of many use cases for the power index indicator.