GlossaryShort-Term Risk Score
Short-Term Risk Score
The Short-Term Risk Score combines ten components from price and volume into a number between 0 and 1: risk-adjusted return, volatility, distance from trend lines, microstructure, price acceleration and volume spikes. High means that many components are at the top of their recent range at the same time and the market is overextended in the short term.
Zones
| Zone | Range | Color |
|---|---|---|
| Very low | below 0.25 | green |
| Low | 0.25 to 0.50 | yellow |
| Medium | 0.50 to 0.75 | orange |
| High | from 0.75 | red |
Reference lines at 0.25, 0.50 and 0.75. Above 0.75 and below 0.25, the background is tinted.
How to read it
- High (from 0.75): Many components are at the top of their range at the same time: price far above its averages, restless volatility, unusual volume. The short-term risk of a pullback is elevated.
- Low (below 0.25): The market is calm and not overextended, often after a correction or in a sideways phase.
- Relative, not absolute: Each component only measures where it stands within its last 42 candles. Even in a calm market, some component reaches its high. The score says how overextended the market is compared with its recent past.
- Regime jump: When the price crosses the 200-candle average, the factor changes from 0.8 to 1.2 or the other way around. The score then jumps by a factor of 1.5, without anything having changed in the components.
Limitations
- No volume, no curve: four of the ten components need it.
- The curve only starts after about 280 candles: 200 for the long average, 30 for its change, 42 for the normalization and the smoothings.
- The lengths 200, 50, 30 and 7 are fixed candle counts; they are not converted to the interval. On 4h candles, the 200-candle average is a little over a month, on daily candles a little over half a year.
- Intended for 4h to 1W.