Volume vs Price Impact Z-Score

Volume vs Price Impact Z‑Score

This indicator measures how disproportionate the traded volume is relative to the price movement of a candle.

Step 1: Volume-to-Price Impact (VPI)

VPI = Volume / (abs(Close - Open) + ε)
(or optionally using High - Low as the price range)

Step 2: Z‑Score Standardization


Z = (VPI - SMA(VPI, length)) / STDEV(VPI, length)
Interpretation:

Z > 2 → High volume with little price movement → possible absorption (accumulation/distribution).

Z < -2 → Large price move with low volume → weak or illiquid move (potential false breakout).

Use cases:

Detecting accumulation/distribution phases.

Highlighting false breakouts or weak price moves.

Supporting entry/exit decisions based on market efficiency (volume vs. price impact).