For Instance:įor a "buy signal", I'm looking for price on the bar after the High Volume Spike to close at or above the close of the High Volume Spike bar. Secondly, I am trying to show a price pattern that shows rejection of the prices in the direction of the High Volume Spike. My first question to you is: How would you determine that a High Volume Spike is with "High Volume"? Do you have a method that would improve my very basic definition of High Volume that would weed out the high volume bars more reliably? One can use whatever number they like, if one looks back 10 bars, you'll get fewer the signals, and if you look back only 2 bars, you'll get many more signals.ġ. So, as of now I came up with the condition that if Volume is greater than the previous 6 bars, this should signify great volume. I believe that volume is relative, and therefore some days 10,000 contracts in 5 minutes is a lot, and other days 20,000 contracts in 5 minutes is a lot. As well, I believe that by adding a few other conditions to this indicator that would take into account other volume indications based on Bid/Ask volume, such as the Delta (Buy Volume - Sell Volume) it would be possible to get some very nice trade setups that would work in conjunction with our own understanding of volume's affect on price.įirstly, I am trying to determine what should signify high volume. I'm not trying to design this indicator to be traded solely on it's own without regard to trend, S/R, High and Low Volume areas, but it does many times pinpoint the start of the reversal. In order to more easily see volume's impact on price, I set out to start developing an indicator that would show greater volume than previous bars and confirmation of a pause and potential reversal by using a price pattern that would show potential weakness when the Volume Spike is at highs and strength when the Volume Spike is at lows. My Idea for this indicator began when I started noticing that when significant volume enters the market, many times this occurs at or near market turning points. High Volume Spike Reversal Indicator Development:
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