This filter looks at an instrument's volatility, and if such volatility falls within the specified threshold percentile (in relation to all other instruments within the strategy), that instrument will be considered as a buy/sell.
For example, if an instrument's volatility (for the past 1 month) is greater than the volatility of at least 80% of all instruments, then exit out of that instrument's Position.
Another example: if you want more risk in your trading (thus potentially higher profits), look for instruments whose volatility is greater than at least 80% of all instruments. In essence, this filter is useful to select instruments whose volatility is different than the majority of the Portfolio.
1. The first parameter defines how many days (or months) for calculating the volatility.
2. The second parameter defines whether the instrument's volatility must be “Greater than”, “Less than”, “Between”, or “Not between” the threshold percentile, in relation to all other instruments.
“Between” is useful if you want at least X% of all instruments to have higher volatility than the instrument, while at least Y% of all instruments have lower volatility. This way you're defining a range, thus the instrument's volatility is not too high and not too low in relation to all instruments.
“Not between” is the opposite, that is, you're looking for instruments whose volatility is at the extreme end (either too high or too low) in relation to all instruments. It could be useful if you are a no-fuss person: it's either black or white, nothing in between.
That is, you'll trade either very stable instruments from this Portfolio (no losses and little gain), or trade very risky instruments from this Portfolio (big profit or big losses).
3. The third parameter defines the threshold percentile.
For example, if an instrument's volatility must be “Greater than” the 80th percentile, it means at least 80% of all other instruments are below this instrument's volatility (could be more than 80%, but not less).
Or, if an instrument's volatility must be “Less than” the 80th percentile, it means at least 20% of all other instruments have higher volatility than this instrument (could be more than 20%, but not less).
Once this filter is applied, there's a Volatility indicator displayed below the Price Chart (shows the volatility of a selected instrument during the specified period).