Historical Volatility Indicator on Gold

What it shows

One line in its own pane under the price. Higher means bigger candle-to-candle moves in the recent past. It has no direction: a sharp sell-off and a sharp rally both push it up.

How Pravex works it out

1. For every candle, take the log return: ln(close ÷ previous close).
2. Take the standard deviation of the last 10 log returns (the Length setting). Pravex divides by the number of returns, not by one less.
3. Scale it to a year and turn it into a percentage: HV = 100 × deviation × √365. On weekly and monthly candles the factor is √(365 ÷ 7) instead.

Settings

Setting	Default	What changing it does
Length	10	How many returns go into each reading. A shorter length reacts to the last few candles and jumps around; a longer one gives a smoother line that is slower to notice a change.

How traders read it

Traders use it to compare today with the recent past. Volatility has a habit of drifting back toward its usual level, so a reading well under the last few months is often read as a quiet spell that may not last. A spike tells you the market is already moving hard, so stops placed at the usual distance get hit more easily.

It also helps with position size. Say (example numbers) gold’s daily HV doubles from one week to the next: the same lot now risks about twice as much per day, so halving the size keeps the daily risk about where it was.

When it misleads

The factor of √365 assumes one candle per day. On hourly or 15-minute candles the same factor is used, so the line shows the swing of one candle scaled as if it were a day, which is far lower than the real yearly figure. Use daily candles for a number you can compare with option prices or other sites. Gold has daily candles on weekdays only, about 260 a year, so √365 also puts the daily figure about a fifth above the √252 convention many published volatility figures use. And HV only looks back: it says how much price moved, never how much it will move.

Questions and answers

What is a high Historical Volatility for gold?

There is no fixed line. Compare the reading with gold’s own past: open the daily chart, look at the last year of the HV line and see where today sits in that range.

Is Historical Volatility the same as ATR?

No. ATR is an average candle range in price units, so it moves with the price level. HV is a percentage of returns, so you can compare it across markets and years.

Why does HV on the hourly chart look so low?

Pravex scales by √365 on any timeframe up to a day, so an hourly reading is the hourly swing scaled as if each candle were a day. Read HV on daily candles when you want the yearly figure.

Does Historical Volatility show direction?

No. It squares the returns, so drops and rallies count the same. Pair it with a trend tool if you need the direction.

Related: Average Daily Range, Bollinger Bars, Chandelier Exit, every indicator.