Indicator Overview

The σ Trading Channel is a statistically grounded price envelope designed to identify high-probability reversal zones and trend conditions in price action. It anchors a dynamic mean reversion channel to a baseline moving average, then expands it using a volatility-adjusted multiple of standard deviation, calculated from the price-to-baseline ratio over a specified historical lookback. This approach adapts to prevailing market regimes by accounting for both directional trend and statistical dispersion.

Unlike static bands, this indicator uses a forward-thinking ratio-based framework that adjusts in proportion to historical relationships between price and its moving average, rather than absolute volatility. The result is a responsive trading channel that can help traders contextualise price extremes, manage risk, and identify potential breakout or mean-reversion setups with greater nuance.

Dual-Ticker Comparison Logic

The ‘Crypto’ fields allow the indicator to operate in both absolute price and relative performance modes, making it suitable for outright positioning or pair-based allocation decisions.

• Single Crypto Analysis: If Crypto 2 is left blank, the indicator measures Crypto 1 against US Dollars. This mode is designed to identify statistically stretched rallies, deep mean-reversion zones, and long-term accumulation conditions where price trades multiple standard deviations below its historical average.

• Relative Strength and Ratios: When both fields are populated, the indicator automatically constructs a ratio of Crypto 1 divided by Crypto 2, such as ETH/BTC or SUI/SOL. The metric is then calculated on the ratio itself, isolating relative performance and stripping out broad market beta. This enables precise identification of overperformance, underperformance, and regime shifts between assets.

How To Use

The channel’s white line represents the baseline, with green upper and red lower bounds forming a volatility cloud. Prices touching or exceeding the upper bound suggest overbought conditions, historically signalling potential pullbacks, ideal for profit-taking. Prices at or below the lower bound indicate oversold conditions, often preceding rebounds, suitable for buying. Traders can enter long positions near the lower bound and exit or short near the upper bound. Investors may accumulate Bitcoin during lower-bound touches and reduce exposure near upper-bound peaks, leveraging the channel’s cycle-aware design to navigate volatile trends effectively.