Volume Momentum [LucF]

10 במרץ 2019

Volume momentum gives much more information than a simple volume MA. It does require interpretation however, since increasing volume momentum can indicate strengthening of both an up or down movement. Volume momentum peaks and bottoms are also interesting as they often lead to shifts in price movement.

In order to help interpretation, I color rising volume momentum using price momentum. Green indicates volume-supported upward price movement and red indicates volume-supported downward price movement.

As to falling volume momentum, in my world view it indicates exhaustion or disinterest which requires prior price activity to be interpreted. In strong and steady price movements it can indicate a mere pause. After high price volatility often signalling a top or bottom, falling volume momentum often leads reversals.

Features

• Two optional MAs on the main volume momentum line, with crosses on the short MA.
  
• A higher time frame line (shown by default), with the higher time frame being a user-defined multiple of the current chart’s interval. The default is 8, so that a 15m chart will also show a 2h volume momentum.
  

Two Markers

• Tops/Bottoms (marker 1): these occur on high/low price momentum pivots situated in favorable regions, combined with volume momentum peaks.
  
• Pauses/Reversals (marker 2): these simply identify volume momentum high pivots that often lead to shifts in price movement. They are not directional. You can choose to color bars where these markers occur (shown on chart).
  

You can show only long or short markers.

Alerts
You can define alerts on any combination of markers you configure. After defining the markers you want the alert to trigger on, make sure you are on the interval you want the alert to be monitoring at, then create the alert, select Volume Momentum, use the default “Configured Markers” alert condition and choose your triggering window (usually “Once Per Bar Close”). Once the alert is created, you can change the indicator's inputs with no effect on the alert.

Use Cases

• The higher time frame line is very useful in situating current volume activity in a larger context.
  
• I consider all peaks in volume momentum as potentially significant events.
  
• When looking for an entry, I will often wait for the descending volume momentum to change direction at a shorter interval, using price momentum to confirm that increasing volume is working in my favor.
  
• Volume momentum variations can often inform otherwise insignificant price momentum activity.
  
• Here I use price momentum to color volume momentum; inversely, I also use volume momentum to color my momentum indicator.
  

Notes

• Where the markers on my Volume Columns indicator focus on confirming strength of price movements, this indicators’ markers try to focus on shifts in price movement.
  
• My volume momentum is calculated using a smoother variant of CCI which came to be known as WaveTrend.