Effective Volume (ADV) v3

4 Nov

Effective Volume (ADV) v3: Enhanced Accumulation/Distribution Analysis Tool

This indicator is an updated version of the original script by cI8DH, now upgraded to Pine Script v5 with added functionality, including the Volume Multiple feature. The tool is designed for analyzing Accumulation/Distribution (A/D) volume, referred to here as "Effective Volume," which represents the volume impact in alignment with price direction, providing insights into bullish or bearish trends through volume.

• Accumulation/Distribution Volume Analysis: The script calculates and visualizes Effective Volume (ADV), helping traders assess volume strength in relation to price action. By factoring in bullish or bearish alignment, Effective Volume highlights points where volume strongly supports price movements.
  
  
• Volume Multiple Feature for Volume Multiplication: The Volume Multiple setting (default value 2) allows you to set a multiplier to identify bars where Effective Volume exceeds the previous bar’s volume by a specified factor. This feature aids in pinpointing significant shifts in volume intensity, often associated with potential trend changes.
  
  
• Customizable Aggregation Types: Users can choose from three volume aggregation types:
  Simple - Standard SMA (Simple Moving Average) for averaging Effective Volume
  Smoothed - RMA (Recursive Moving Average) for a less volatile, smoother line
  Cumulative - Accumulated Effective Volume for ongoing trend analysis
  
• Volume Divisor: The “Divide Vol by” setting (default 1 million) scales down the Effective Volume value for easier readability. This allows Effective Volume data to be aligned with the scale of the price chart.
  

Visualization Elements

• Effective Volume Columns: The Effective Volume bar plot changes color based on volume direction:
  Green Bars: Bullish Effective Volume (volume aligns with price movement upwards)
  Red Bars: Bearish Effective Volume (volume aligns with price movement downwards)
  
• Moving Average Lines:
  Volume Moving Average - A gray line representing the moving average of total volume.
  A/D Moving Average - A blue line showing the moving average of Accumulation/Distribution (A/D) Effective Volume.
  
• High ADV Indicator: A “^” symbol appears on bars where the Effective Volume meets or exceeds the Volume Multiple threshold, highlighting bars with significant volume increase.
  

How to Use

• Analyze Accumulation/Distribution Trends: Use Effective Volume to observe if bullish or bearish volume aligns with price direction, offering insights into the strength and sustainability of trends.
  
  
• Identify Volume Multipliers with Volume Multiple: Adjust Volume Multiple to track when Effective Volume has notably increased, signaling potential shifts or strengthening trends.
  
  
• Adjust Volume Display: Use the volume divisor setting to scale Effective Volume for clarity, especially when viewing alongside price data on higher timeframes.
  

With customizable parameters, this script provides a flexible, enhanced perspective on Effective Volume for traders analyzing volume-based trends and reversals.