Forex Volatility Heatmap: Close-Derived ATR Estimates

What this heatmap measures

The heatmap compares estimated movement magnitude across supported currency pairs. It uses daily ECB close observations because the governed source does not supply broker open, high or low candles. The result is therefore a close-derived ATR proxy estimate, not standard ATR calculated from observed OHLC bars and not a real-time market feed.

Volatility is not direction. A higher estimate does not say whether a pair will rise or fall, and no score or z-score is an entry, exit, stop, lot size or trading recommendation.

Model 1.0.0 methodology

1. Causal range estimate. For each day after the initial seed, the model calculates |close[t] − close[t−1]| + 1.8 × mean(prior absolute close changes). Only observations available before that modeled day enter the prior mean, preventing future-data leakage.
2. Wilder smoothing. The first proxy average is the mean of the first selected-period range estimates. Later values use (previous estimate × (period − 1) + current range estimate) ÷ period.
3. Comparable metric. The smoothed price estimate is divided by the latest close to produce estimated ATR percentage. Pip estimates remain available for familiar display, but they do not drive cross-pair ranking.
4. Relative score. The lowest estimated percentage in the displayed universe maps to 0 and the highest to 100. A flat universe maps every pair to 50. Bands are fixed product labels: 0–14 relative low, 15–34 below average, 35–54 average, 55–74 above average, 75–89 high and 90–100 extreme.
5. Own-history comparison. The z-score compares the current proxy estimate with its ATR-proxy history using population standard deviation. Above +2 is labelled high versus recent estimates; below −1 is labelled low versus recent estimates. These thresholds are descriptive product assumptions.

How to use the display safely

Choose a supported pair group, smoothing period and display unit. Changing the pair group changes the relative score universe, so scores from different filters are not directly interchangeable. Click a pair to inspect its estimate, latest close-derived range, percentage, z-score and model history.

The page checks every five minutes for a newer daily ECB observation; repeated checks can return the same date. For stop placement or position sizing, verify standard ATR using your broker's own OHLC candles and server time before using the instrument-aware sizing calculator.

Limitations

• The 1.8 extension factor is a declared product assumption without an approved broker-OHLC benchmark; it must not be interpreted as a measured intraday range.
• Daily reference closes omit intraday highs, lows, gaps, spreads, slippage, commissions, rollover and executable pricing.
• The estimate depends on the observation window, smoothing period and supported pair universe.
• Min-max normalization can exaggerate small differences and always creates relative leaders and laggards unless the universe is flat.
• Z-scores describe this model's recent estimates; they do not establish a probability of breakout, reversion or future volatility.

Worked example: one relative heatmap score

Assume EUR/USD has a current close-derived ATR proxy of 0.70% of price, while the lowest and highest estimates in the selected pair group are 0.40% and 1.00%. Its relative score is (0.70 − 0.40) ÷ (1.00 − 0.40) × 100 = 50.

A score of 50 sits in this model's 35–54 average band for that displayed universe. It does not say that EUR/USD will move 0.70% next, nor does it provide direction. Changing the pair group, smoothing period or available observations can change both the endpoints and the score.

Sources and statistical conventions

• European Central Bank — euro foreign-exchange reference rates supplies the governed daily close observations.
• NIST/SEMATECH — measures of scale documents standard-deviation conventions used to explain the z-score boundary.

The close-derived range extension and score bands are versioned product assumptions, not methods endorsed by either source.

Frequently asked questions

• Is this standard ATR calculated from observed OHLC candles?

  No. Model volatility_close_atr version 1.0.0 creates a close-derived range estimate from daily ECB closes and applies Wilder smoothing. It cannot recover actual broker highs, lows, gaps or server-time candles, so every result remains estimated.

• How is the close-derived range estimated?

  For each modeled day, the range estimate is the absolute close change plus 1.8 times the mean of prior absolute close changes. The 1.8 factor is a declared product assumption, and only prior observations are used so later data does not leak into earlier estimates.

• Is the 0-100 score absolute or relative?

  It is relative to the pairs currently displayed. Version 1.0.0 min-max normalizes estimated ATR as a percentage of price, not pip count. The lowest estimate maps to 0, the highest to 100, and a flat universe maps every pair to 50.

• What does the z-score mean?

  The population z-score compares the current ATR proxy estimate with that pair's own modeled history. Above +2 is labelled high versus recent estimates and below -1 low versus recent estimates. These product thresholds do not predict a breakout, reversion or future volatility.

• Why does the heatmap not calculate lot size?

  This close-derived estimate is not verified broker ATR. Check standard ATR on your broker platform using its observed OHLC candles and server time, then provide that verified value to an instrument-aware position-sizing calculator. The heatmap also lacks the account, risk and conversion inputs required for lot sizing.

• How often does the underlying data update?

  The page checks every five minutes, but the governed ECB reference source publishes daily on business days. Repeated checks can return the same observation date and do not create intraday volatility data.

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