The regime is based on the instrument’s own historical volatility rather than a fixed ATR threshold applied equally to every stock.
The indicator calculates a slower volatility-environment baseline from percentage-based True Range and ranks the current value against its own historical observations.
The approximate classifications are:
Low: at or below the 30th historical percentile
Normal: between the low and high thresholds
High: at or above the 70th percentile
Extreme: at or above the 85th percentile
This separates two questions:
Environment: Is volatility historically low, normal, high or extreme for this instrument?
Direction: Is volatility expanding, easing, steepening or flattening?
The indicator also compares current True Range with the recent volatility environment to identify:
Compression
Expansion
Volatility shocks
Compression-to-expansion transitions
Expansion-to-compression transitions
A volatility regime is descriptive context. It is not, by itself, a buy or sell signal.
A pullback accompanied by deteriorating RS, expanding downside volatility, abnormal extension or broken structure would be interpreted differently.
“Pressure” refers specifically to volatility pressure, not buying or selling pressure.
It begins with True Range expressed as a percentage of price. Using a percentage makes volatility more comparable across instruments with different prices.
This percentage-based True Range is smoothed to reduce single-bar noise. The indicator then measures how the smoothed volatility level has changed relative to its previous level.
The resulting states are:
Expanding: volatility pressure is increasing
Easing: volatility pressure is decreasing
Steepening: the change in volatility is accelerating
Flattening: the change in volatility is losing momentum
Pressure is deliberately interpreted separately from price direction.
Expanding volatility is therefore not automatically bullish or bearish. Its meaning depends on the trend, price structure and location:
Volatility expanding in the direction of a healthy breakout may be constructive.
Volatility expanding against the prevailing trend may indicate increasing risk.
Volatility easing during an orderly trend or pullback can be constructive.
Extreme volatility combined with structural deterioration is generally less supportive.