Confluences

Tail Ratio Confluences

The Tail Ratio is a powerful context tool that pairs exceptionally well with traditional directional indicators.

• Trend Following: Use the Tail Ratio to validate trend strength. A strong uptrend accompanied by a Right-tailed (Positive Skew) reading suggests the trend is supported by robust upside momentum and is structurally sound.
• Mean Reversion / Reversals: Look for divergences. If price is making new highs but the Tail Ratio shifts to a Left-tailed (Negative Skew) regime, it warns that underlying downside risk is building, potentially signaling an impending reversal.
• Volatility Breakouts: When price breaks out of a consolidation range, a corresponding surge in the Tail Ratio can confirm the direction of the breakout has strong structural backing.