Volume Spike Analysis [Trendoscope]

8 Okt 2023

The Volume Spike Analysis [Trendoscope] is designed to detect volume spikes in a trading instrument's data. Rather than relying on the traditional method of comparing volume to its moving average, this indicator employs a distinctive approach to ensure accuracy.

Methodology

1. Historical Volume Comparison: The indicator first assesses the current bar's volume, say 100k, and looks back historically to determine the last instance when the volume was equal to or exceeded this level.
   
2. High Volume Bar Gap Calculation: The intervals or gaps between high volume bars are recorded. These gaps help in determining how common or rare a particular volume spike is.
   
3. Spike Magnitude Determination: Here, the extent of the volume spike is gauged in relation to either the median, lowest, or average volume of the intervening bars. The reference metric (median, lowest, or average) can be chosen by the user through the "Volume Spike Reference" input parameter.
   
4. Spike Percentile Analysis: The calculated spike magnitude (as a percentage of the reference volume) is cataloged. This collection aids in understanding the relative intensity of the current volume spike when compared to previous spikes.
   
5. Threshold Comparisons: The indicator then compares the calculated "High Volume Distance Percentile" to the "Last High Volume Distance Percentile" and the "Volume Spike Percentile" to the "Volume Spike Threshold". If these values surpass the preset thresholds, the current bar is flagged as a high volume or volume spike bar.
   

Visual Components

1. Bar Highlighting: High volume or volume spike bars are accentuated with bright colors for easy identification. All other bars have increased transparency to reduce visual clutter.
   
2. Distance from the High Volume Bar: Indication of the number of bars since the last high volume occurrence and its respective percentile.
   
3. Comparative Factors: A factor representing the magnitude by which the current volume surpasses the lowest, median, and average volumes.
   
4. Lowest, Median and Average Volumes: The lowest and median volumes are indicated by tooltips on lines marking the respective bars. The average volume is depicted as a dotted horizontal line, with a triangle marker tooltip revealing its value.
   

This indicator offers a nuanced analysis of volume spikes, aiding traders in making more informed decisions.