Some free volume indicator code today. Volume has to be the most underrated market variable used in technical analysis. I think this is because traders focus on whether the volume is buying volume or selling volume.
This has to be flawed – the buying volume by definition equals the selling volume. What we should be looking for is whether new buyers or sellers are entering the market – and I use a combination of the bar's volume and RANGE to determine this.
Better Volume Indicator Code
TradeStation EasyLanguage code for the Better Volume indicator is shown below. Volume bars are plotted as normal (i.e. as a histogram) but are colored based on 5 criteria:
- High volume churn
- Low volume churn
- Climax volume
- Climax volume plus High volume churn
- Low volume
Inputs: Color(Cyan), LowColor(Yellow), ClimaxColor(Red), ChurnColor(Green), ClimaxChurnColor(Magenta), LowChurnColor(White), AvgColor(Red);
BarColor = Color;
Value1 = V;
Value2 = V*Range;
If Range <> 0 then Value3 = V/Range;
Value4 = Average(Value1,100);
If Value1 = Lowest(Value1,20) then BarColor = LowColor;
If Value2 = Highest(Value2,20) then BarColor = ClimaxColor;
If Value3 = Highest(Value3,20) then BarColor = ChurnColor;
If Value2 = Highest(Value2,20) and Value3 = Highest(Value3,20) then BarColor = ClimaxChurnColor;
If Value3 = Lowest(Value3,20) then BarColor = LowChurnColor;
Better Volume Indicator EasyLanguage Code
The look-back period for determining high and low values is 20 bars. This is a typical cycle length and so the highest or lowest values during the last cycle are identified. I have "hard coded" the value of 20 but it is easy enough to change or use an input variable instead.
This is how the Better Volume indicator looks on a 45 minute chart of the Emini with the 5 different volume criteria annotated. When there are no volume patterns to highlight the default bar coloring is cyan (light blue).
Better Volume Indicator (45 minute Emini)
Better Volume Indicator: Volume Climax Examples
Volume Climax is identified by multiplying volume with range and then looking for the highest values in the last 20 bars. In the code above, Value2 is used to make the calculation and comparisons. There are two types of Volume Climax signals.
The first type is market exhaustion followed by a reversal in direction (both at tops and bottoms). Traders might have entered the market early trying to pick the bottom and then placed stop loss orders just below current levels. If the market can't find enough buyers these stops can be hit and begin a cascading move down in the market, quickly hitting more and more stops on the way down. The volume and range both increase and is only stopped by committed buyers with large volume coming into the market.
The first chart shows these Climax Volume patterns on a weekly chart of the Emini. Paintbars has also been added onto the weekly bars, colored red when making new lows and white when making new highs. The exhaustion followed by reversal bars stand out.
Better Volume Indicator (Weekly Emini)
The second type of Volume Climax pattern is when the market continues in the direction of the Volume Climax bar and "takes off". On the 9 minute Emini chart below I've annotated the 2 types of pattern. Again the Paintbars are there to highlight the Volume Climax bars.
Better Volume Indicator (9 minute Emini)
The "Trampoline" Volume Indicator Signal
Now for one of my favorite volume indicator signals – I call it the "Trampoline" pattern because it looks like the market bounces. When you get 2 Volume Climax bars close together, one an Exhaustion bar and the second a Take-Off bar, this often pinpoints a market reversal. In addition, I look for this pattern to occur at a cyclical turning point.
The 45 minute Emini chart below shows how this pattern nailed the bottom of a recent down move.
"Trampoline" Volume Indicator Signal (45 minute Emini)
Good luck with your Emini trading.