How to Interpret Better Volume Indicator Colors

 Better Volume Indicator: Volume Climax Up

Volume Climax Up bars are identified by multiplying buying volume (transacted at the ask) with range and then looking for the highest value in the last 20 bars (default setting). Volume Climax Up bars indicate large volume demand that results in bidding up prices. The default setting is to color the bars red.

Volume Climax Up bars are typically seen at:

 The start of up trends

 The end of up trends, and

 Pullbacks during down trends.

The beginning of an up trend is almost always marked by a Volume Climax Up bar. This shows that the buyers are anxious to get on board and large volume enters the market and bids up prices quickly. A valid breakout should be followed by more buying but occasionally the low of the Volume Climax Up bar is tested.

Market tops are also characterized by Volume Climax Up bars often with High Volume Churn and/or Low Volume test patterns. Changes in trend usually take a while to develop, so don't be suckered in too soon – wait for the market to become exhausted. A useful signal to watch for is the Low Volume bar – this shows that finally there is no demand and the market is likely to stop advancing.

During a down trend, pullbacks are often characterized by Volume Climax Up bars. These show short covering or traders calling a bottom too quickly. As soon as this Climax volume declines the down trend is likely to resume. Continuation of the down trend is confirmed when the low of the Volume Climax Up bar is taken out.

Better Volume Indicator: Volume Climax Down

Better Volume Indicator: Volume Climax Down

Volume Climax Down bars are essentially the inverse of Volume Climax Up bars.

Volume Climax Down bars are identified by multiplying selling volume (transacted at the bid) with range and then looking for the highest value in the last 20 bars (default setting). Volume Climax Down bars indicate large volume supply that results in pushing down prices. The default setting is to color the bars white.

Volume Climax Down bars are typically seen at:

 The start of down trends

 The end of down trends, and

 Pullbacks during up trends.

The beginning of a down trend is almost always marked by a Volume Climax Down bar. This shows that the sellers are anxious to get on board and large volume enters the market and pushes down prices quickly. A valid breakdown should be followed by more selling but occasionally the high of the Volume Climax Down bar is tested.

Market bottoms are also characterized by Volume Climax Down bars often with High Volume Churn and/or Low Volume test patterns. Changes in trend usually take a while to develop, so don't be suckered in too soon – wait for the market to become exhausted. A useful signal to watch for is the Low Volume bar – this shows that finally there is no supply and the market is likely to stop declining.

During an up trend, pullbacks are often characterized by Volume Climax Down bars. These show profit taking or traders calling a top too quickly. As soon as this Climax volume declines the up trend is likely to resume. Continuation of the up trend is confirmed when the high of the Volume Climax Down bar is taken out.

Better Volume Indicator: High Volume Churn

Better Volume Indicator: High Volume Churn 

High Volume Churn bars are identified by dividing volume by the bar's high to low range and then looking for the highest value in the last 20 bars (default setting). High Volume Churn bars indicate profit taking, new supply entering the market at tops or new demand entering the market at bottoms. The default setting is to color the volume histogram bars green and the price PaintBars blue.

High Volume Churn bars are typically seen at:

 The end of up trends

 The end of down trends, and

 Profit taking mid-trend.

When Volume Churn is high it indicates demand is being met by new supply at tops or supply is being met by new demand at bottoms – in effect, price is not able to advance as new supply or demand enters the market. Hence the bar's high to low range is low.

Maybe one of my customers (Neil F.) says it better than I can:

“I like to think of the High Volume Churn bars as ‘brakes’. It’s like hitting the brakes – usually, the car will stop shortly thereafter (1-2 points), and then turn around. At other times, however, the momentum is so great that all you get is a pause and then the market just continues going in the same direction! Unfortunately, sometimes it is hard to tell which outcome will occur. Then you just need common sense.”

Occasionally Volume Climax (up or down) and High Volume Churn bars coincide and these bars are colored magenta.

A word of caution with intra-day charts. High Volume Churn often appears on the last bars of the trading day. This does not necessarily represent a possible turning point, but is more likely just to be high volume from day traders closing out positions.

“Tape Reading & Market Tactics” by Humphrey B. Neill (1931)

And lastly a bit of history and a screenshot from Humphrey B. Neill’s 1931 classic on reading the tape. In this section he talks specifically about tops being marked by high volume and no progress – high volume churn. HT to John A. for pointing me in the direction of this brilliant book. Darn, and I thought I’d coined the term

Better Volume Indicator: Low Volume 

Low Volume bars are identified by looking for the lowest volume in the last 20 bars (default setting). Low Volume bars indicate a lack of demand at tops or a lack of supply at bottoms. The default setting is to color the bars yellow.

Low Volume bars are typically seen at:

 The end of up trends

 The end of down trends, and

 Pullbacks mid-trend.

Low Volume bars are my favourite volume indicator signal. They show what the amateurs are doing on tick charts. They are also very useful confirming indicators of a change in trend direction when the market is testing a top or bottom.

Better Volume Indicator: EasyLanguage Code Snippet

A snippet of the TradeStation EasyLanguage code for the Better Volume indicator is shown above. By default, intra-day charts use the “UpTicks” and “DownTicks” data available within TradeStation. For daily, weekly or monthly charts an estimate of the buying and selling volume is calculated based on the bar’s open, high, low and close.

Please note, the TradeStation EasyLanguage term “UpTicks” will call the total volume transacted on an uptick/at the ask. Similarly, the term “DownTicks” will call the total volume transacted on a downtick/at the bid. Total volume for an intra-day bar can be deduced by adding together “UpTicks” and “DownTicks”. This terminology may not be the same for other charting platforms – so don’t bug me about it!

Better Volume Indicator: Summary

The table above is a quick reference guide that shows what volume indicator signals to watch for at different stages of the market:

 Market tops are characterized by Volume Climax Up bars, High Volume Churn and Low Volume Up bars (also called Testing).

 Market bottoms are characterized by Volume Climax Down bars, High Volume Churn and Low Volume Down bars (Testing).

 Pullbacks, in either up or down trends, are similar to market topping or bottoming patterns, but shorter in duration and with simpler volume patterns.

For more information, you can watch the following YOUTUBE video https://www.youtube.com/watch?v=fIMp0qncI38

You can open a trading account with EXNESS by clicking this link https://www.exness.com/a/rc1k7b0t or you can contact me through glaxim10@gmail.com