Prorealtime Indicators For Volume Analysis

In this post we review a volume indicator that didn’t actually work and look at ways to make it work using basic prorealtime indicator coding and enhance it to support making decisions around potentially entering and exiting positions

As a bit of a back story, last week I had begun to look into volume profiling. This is a method used by top futures traders such as Merritt Black (Youtube) and in particular I researched a lot of the Axia Futures Content (Website) (Youtube)

The availability of indicators to used by those traders in prorealtime via the prorealtime market place and the Volume Profile Solutions store peaked my interest

One of the aspects of entering and exiting trades that they used was the buying and selling volumes of bars for example leading into break outs where increasing volume would support a strong break out rather than a smaller move, or seeing large selling volumes into a support level and it holding

By splitting the buying and selling volumes rather than seeing just volume you could now see the direction of the volume

Trading Volume Analysis Indicator Overview Video

In the video below I cover updating the code of the basic indicator and some of the theory around how the new indicators can be used with your trading

The base indicator was one that I guess picked up from Prorealcode but looking through the library I wasn’t able to find the original post

Indicator – Volume as buy and sell histog

When using the indicator I noticed that there seemed to be a number of bars that were only showing Red however when looking at the buy and sell volume numbers it became apparent that what was happening was that the red bar overlaid the green bar

This had two affects, firstly the height of the volume shown was not a total of the buying and selling volume but simply the largest value

Secondly as the red bar overlaid the green bar the ratios of green to red ie buying and selling that I was hoping to use as an indicator were not accurate

Solution One – Use A Negative Value For The Selling Histogram

Indicator – Volume as Bs Hisotgram HL

At this point I know that there are people who can do fantastic things with indicators (My head and shoulders indicator has a smiley face for the head) but I am not one of them

So I updated the formula to multiply the selling volume by -1 and although a rough and ready solution it did work in that the relative volumes of buying and selling were now visible

Solution Two – Use Net Value

Indicator – Volume BS Net

The next solution was to use a net value for the histogram while using a blue line to display the overall volume

Adding Simple Moving Averages

Indicator – Vol Histogram and SMA

As a next step I added indicators for the average volumes

In it’s current form this may work better for FX as for indices I think that an average based on cash session only volumes would be more appropriate as the non cash session volume greatly reduces the average

Creating A Flat Base For The Net Volume Indicator

Volume BS Net Flat Base

For this version I used the next figure for the histogram but created a flat base from zero with the blue line showing the total volume

At this point I am not sure if this is too similar to a normal volume chart and may get too confusing, having the selling volume as a negative value did give the indicator a unique look that broke the inherent training of having looked at volume bars being the colour of the candle for years

Perhaps there is a better way to represent the data? Thoughts in the comments below


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