ALPHA: Volume

31 thg 5, 2019

PLEASE READ THE ENTIRE POST BEFORE PURCHASING & USING THE ALPHA: Volume INDICATOR. Saves you and me some time in emails and messages. :)

Volume is the only true predictive method for an assets movement. 

Most of my followers know I am volume-obsessed, volume precedes price and identifying major spikes in volume prior to an assets movement is one of the most valuable finds a trader can accomplish. I have spent more time studying volume then any other analysis technique. During this time I have become frustrated time and time again with the inefficiencies our typical volume indicators produce. We have the old bar volume indicator everyone sees on their charts, OBV, CMF, Accumulation/Distribution, MFI etc. etc., the list goes on. I have my favorites that I have written about in past publications, but none provide a real time volume view to my liking.

Frustration has led me to create something I truly believe is groundbreaking.... And it wasn't easy, by any means.

ALPHA: Volume

The ALPHA series is a suite of indicators designed to improve analysis and past analysis techniques. The ALPHA: Volume provides real time volume in addition to identifying major positions and true visibility into where and when positions are being taken. Being able to consistently identify these qualities creates an invaluable edge on the market. 

The average buyer of assets are a drop in the bucket in terms of how they impact daily transactions (volume) compared to institutional buyers. The institutional buyers typically buy in large blocks. When institutional buyers get into the market, they cause significant increase in demand. Like any case of supply and demand, when demand increases and supply stays the same, price will increase. When an asset becomes desirable, it is more likely that supply may decrease (as current holders will be less willing to sell) which will cause even more price pressure. 

Based on this volume precedes price analysis, it is probably obvious that there is a herd mentality when it comes to the market. When one institution is buying a large block of an asset, other institutions will spot the buying and be motivated to jump in as well. This increases the pressure on the assets price. You and I are small investors so it is important to join the herd and let the supply and demand caused by the institutions carry our investments higher.

Introduction

It's fairly simple to read, the default settings show an area with breaks view meaning positive and negative values, this is useful for seeing trends, pressure, and measuring divergences. Additionally, there is coloring to keep an eye on. To keep it simple:

Blue: Buying
Red: Selling
Teal: Heavy buying/major positions being taken.
Orange: Heavy selling/major positions being taken.

Let's get into what ALPHA: Volume does, it has numerous capabilities that I am still discovering, identifying false rallies/sell offs, telegraphing major moves, identifying underwater positions, spotting divergences, bottoms, tops and on and on. One thing to note that it doesn't do is show cumulative volume such as the OBV, this can be useful for identifying rising wedges and similar patterns, I will no longer be using other volume indicators unless I am identifying a pattern that is reliant on cumulative volume. 

In this example below, we see heavy selling causing a dip that was then bought up with major positions causing a rally because demand exceeded supply. 


The next example shows large positions being taken drying up supply ultimately causing a rally, very well telegraphed.


Same scenario but heavy selling weakening demand.


Originally, I planned on going on and on with examples, but I am going to keep this simple & short as I don't want to prolong the publishing. This will sell itself as more people discover the quality and accuracy. Still not sold? No worries, I'll be doing all of my volume analysis off of this indicator, so stay tuned for more in depth analysis with it on TradingView and twitter, I am truly excited for this indicator to be used by traders and analysts. Those of you that purchase and use it, (already orders off of my site and I haven't even published this) feel free to tag me in a tweet with a chart if you have questions, there will be times when volume is not making sense and perhaps I can offer insight into what is happening.

Conclusion

Before I get messages, "But Nick, the volume indicator was wrong here!".... No it wasn't, its not a signal generator, it is measuring real time volume. I cannot fix peoples' faulty positions that the indicator is showing. Volume should never be used independent of price action & other forms of analysis to determine buying or selling patterns. Volume is extremely important as a confirmation for technical indicators and I strongly suggest you use it as such. I will be doing several videos on this over the next couple weeks on my youtube channel showing ways to confirm other indicators with volume. Ichimoku goes great with it btw :).

Please note this works on all assets on all time frames, during my volume studies with this indicator I noticed lots of noise depending on the time frame, so I have implemented a feature that automatically adjusts to the correct settings based on what time frame you are on. I added a masking feature to keep my work proprietary that shows 30 and 500 (not true) as the settings in case my formula is ever figured out (doubtful but the capitalist in me that believes it is ok to protect what you work for) If you uncheck "Use Preset Periods" in settings then it will allow you to adjust the periods and peak limit, I don't recommend playing around with the settings as you can disturb the balance I've found. However, the option is there for the analysts that are into experimenting. If you feel the need to adjust some things then peak limit is the only thing I recommend adjusting, it allows you to view higher parameter limits on the volume spike to measure divergences of very large orders, the peak limit doesn't matter so much as long as it indicates the teal or orange, some spikes go as high as 80K in testing. In the end the size is typically irrelevant, but it is there in case you want to measure it or have curiosity. 

I want to provide research and discoveries from its users and myself on a regular basis. I will be holding discussions & providing research in my discord server that I run with a team of very talented analysts. The link for that is here: discord.gg/EwFkwZh

This indicator is available for TradingView users on my web site thetradingwizard.com/ for $99, that includes a life time subscription. There is also a monthly subscription option for all three indicators from the ALPHA series. (Please see my published scripts for information on the other two) Both purchase options include updates and support as a user.

This will be the end of the ALPHA indicator series for a while, after finally conquering volume I am moving on with the formulas from the ALPHA series to bigger things. Enjoy!

Disclaimer 
Nothing in this post is to be used or construed as financial advice. The indicator is not a signal-generating indicator and should not be used to trade off of solely. This post is meant as an educational post to explain the functions of the indicator.