Nadaraya-Watson: Envelope (Non-Repainting)

// This source code is subject to the terms of the Mozilla Public License 2.0 at https://mozilla.org/MPL/2.0/
// © jdehorty
// @version=5

indicator(title="Nadaraya-Watson: Envelope (Non-Repainting)", overlay=true, timeframe='')

// In technical analysis, an "envelope" typically refers to a pair of upper and lower bounds that surrounds price action to help characterize extreme overbought and oversold conditions. Envelopes are often derived from a simple moving average (SMA) and are placed at a predefined distance above and below the SMA from which they were generated.
// However, envelopes do not necessarily need to be derived from a moving average. In fact, they can be derived from any estimator, including a kernel density estimator (KDE) such as Nadaraya-Watson (NW). Nadaraya-Watson Estimation is a non-parametric regression technique that uses a kernel function to estimate the value of a function at a given point. 
// In this indicator, the Rational Quadratic (RQ) Kernel is used to estimate the value of the price at each bar. From this estimation, the upper and lower bounds of the envelope are calculated based on ATR and a user-defined multiplier.

// Libraries
import jdehorty/KernelFunctions/2 as kernels 

// Helper Functions
getBounds(_atr, _nearFactor, _farFactor, _yhat) => 
    _upper_far = _yhat + _farFactor*_atr
    _upper_near = _yhat + _nearFactor*_atr
    _lower_near = _yhat - _nearFactor*_atr
    _lower_far = _yhat - _farFactor*_atr
    _upper_avg = (_upper_far + _upper_near) / 2
    _lower_avg = (_lower_far + _lower_near) / 2 
    [_upper_near, _upper_far, _upper_avg, _lower_near, _lower_far, _lower_avg]

kernel_atr(length, _high, _low, _close) =>
    trueRange = na(_high[1])? _high-_low : math.max(math.max(_high - _low, math.abs(_high - _close[1])), math.abs(_low - _close[1]))
    ta.rma(trueRange, length)

// Kernel Settings
h = input.int(8, 'Lookback Window', tooltip='The number of bars used for the estimation. This is a sliding value that represents the most recent historical bars. Recommended range: 3-50', group='Kernel Settings')
alpha = input.float(8., 'Relative Weighting', step=0.25, tooltip='Relative weighting of time frames. As this value approaches zero, the longer time frames will exert more influence on the estimation. As this value approaches infinity, the behavior of the Rational Quadratic Kernel will become identical to the Gaussian kernel. Recommended range: 0.25-25', group='Kernel Settings')
x_0 = input.int(25, "Start Regression at Bar", tooltip='Bar index on which to start regression. The first bars of a chart are often highly volatile, and omission of these initial bars often leads to a better overall fit. Recommended range: 5-25', group='Kernel Settings')

// Envelope Calculations
var float yhat_close = na
var float yhat_high = na
var float yhat_low = na
var float yhat = na
var float ktr = na

yhat_close := kernels.rationalQuadratic(close, h, alpha, x_0)
yhat_high := kernels.rationalQuadratic(high, h, alpha, x_0)
yhat_low := kernels.rationalQuadratic(low, h, alpha, x_0)
yhat := yhat_close
atr_length = input.int(60, 'ATR Length', minval=1, tooltip='The number of bars associated with the Average True Range (ATR).')
ktr := kernel_atr(atr_length, yhat_high, yhat_low, yhat_close)
nearFactor = input.float(1.5, 'Near ATR Factor', minval=0.5, step=0.25, tooltip='The factor by which to multiply the ATR to calculate the near bound of the envelope. Recommended range: 0.5-2.0')
farFactor = input.float(8.0, 'Far ATR Factor', minval=1.0, step=0.25, tooltip='The factor by which to multiply the ATR to calculate the far bound of the envelope. Recommended range: 6.0-8.0')
[_upper_near, _upper_far, _upper_avg, _lower_near, _lower_far, _lower_avg] = getBounds(ktr, nearFactor, farFactor, yhat_close)

var float upper_near = na
upper_near := _upper_near
var float upper_far = na
upper_far := _upper_far
var float upper_avg = na
upper_avg := _upper_avg
var float lower_near = na
lower_near := _lower_near
var float lower_far = na
lower_far := _lower_far
var float lower_avg = na
lower_avg := _lower_avg

// Colors
// red_far = input.color(color.new(color.red, 60), title='Upper Boundary Color: Far', tooltip='The color of the farmost upper boundary of the envelope.', group='Color Settings')
// red_near = input.color(color.new(color.red, 80), title='Upper Boundary Color: Near', tooltip='The color of the nearmost upper boundary of the envelope.', group='Color Settings')
// yhat_green = input.color(color.new(color.green, 50), title='Bullish Estimator Color', tooltip='The Bullish color of the Nadaraya-Watson estimator.', group='Color Settings')
// yhat_red = input.color(color.new(color.red, 50), title='Bearish Estimator Color', tooltip='The Bearish color of the Nadaraya-Watson estimator.', group='Color Settings')
// green_near = input.color(color.new(color.green, 80), title='Lower Boundary Color: Near', tooltip='The color of the nearmost lower boundary of the envelope.', group='Color Settings')
// green_far = input.color(color.new(color.green, 60), title='Lower Boundary Color: Far', tooltip='The color of the farmost lower boundary of the envelope.', group='Color Settings')

// // Plots
// p_upper_far = plot(upper_far, color=red_far, title='Upper Boundary: Far')
// p_upper_avg = plot(upper_avg, color=red_near,title='Upper Boundary: Average')
// p_upper_near = plot(upper_near, color=red_near, title='Upper Boundary: Near') 
// p_yhat = plot(yhat_close, color=yhat > yhat[1] ? yhat_green : yhat_red, linewidth=2, title='Nadaraya-Watson Estimation')
// p_lower_near = plot(lower_near, color=green_near, title='Lower Boundary: Near')
// p_lower_avg = plot(lower_avg, color=green_near, title='Lower Boundary: Average') 
// p_lower_far = plot(lower_far, color=green_far, title='Lower Boundary: Far')

// // Fills
// fill(p_upper_far, p_upper_avg, color=red_far, title='Upper Boundary: Farmost Region')
// fill(p_upper_near, p_upper_avg, color=red_near, title='Upper Boundary: Nearmost Region')
// fill(p_lower_near, p_lower_avg, color=green_near, title='Lower Boundary: Nearmost Region')
// fill(p_lower_far, p_lower_avg, color=green_far, title='Lower Boundary: Farmost Region')