16 July, 2016

Reducing Volume

Rationale & Trading Techniques

When price is moving, the move’s continuation is confirmed by volume. An upward price move accompanied by strong buying volume and buying imbalances provides reassurance and confirmation as to the strength of the move. Conversely, if we have reducing volume as a move progresses, it may be a sign that the move may be coming to an end and will pause or reverse.

Also important is identifying what is not happening. If we do not see reducing volume in buying as price rises (or selling as price falls) then by implication, the move has not yet reached the extreme and has the possibility to continue.

The Reducing Volume indicator analyses the traded volume at the extremes of the price bar and indicates whether volume is reducing at the extreme of the price bar, highlighting divergence between price and volume.

This indicator is particularly powerful when read within the context of significant daily price levels such as daily high/low and the initial balance.

The emoji trading Order Flow Suite Price Rejector indicator uses Reducing Volume as a factor within its calculations.

 


Examples

Note how as price made new lows, Reducing Volume is highlighted in the 10:28:05, 10:28:52 and 10:29:43 price bars however all of these bars display negative Delta. The 10:30:31 bar displays Reducing Volume, i.e. selling pressure is tailing off and this is combined with a shift to positive Delta within the Bar and we see a rebound from the low:

Reducing Volume single end rectangle - Emoji Trading Order Flow Suite

 


Reducing Volume Settings


Input Name Description
Extend Zone Until Future Intersection? Select whether Extension Lines are enabled/disabled for the Reducing Volume price levels.
Extension Line Label Text indicator for the Extension Lines
Draw Location Select whether Reducing Volume is analysed at Both Ends of price bars or at the Bar Extremes, i.e. the upper end of up bars and the lower end of down bars.

Indicator Subgraphs

Subgraph ID Subgraph Description
SG1 Reducing Bid Volume Zone High Use in conjunction with SG2 to highlight the highest and lowest price levels where Reducing Bid Volume occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG2 Reducing Bid Volume Zone Low Use in conjunction with SG1 to highlight the highest and lowest price levels where Reducing Bid Volume occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG3 Reducing Bid Volume Zone High Extension Line Use to set the drawing properties for the Extension Line drawn from the Reducing Bid Volume Zone high price. 
SG4 Reducing Bid Volume Zone Low Extension Line Use to set the drawing properties for the Extension Line drawn from the Reducing Bid Volume Zone low price. 
SG5 Reducing Ask Volume Zone High Use in conjunction with SG6 to highlight the highest and lowest price levels where Reducing Ask Volume occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG6 Reducing Ask Volume Zone Low Use in conjunction with SG5 to highlight the highest and lowest price levels where Reducing Ask Volume occurred within the current bar. Follow this link for the Sierra Chart Notes about Top and Bottom Draw Style Pairs
SG7 Reducing Ask Volume Zone High Extension Line Use to set the drawing properties for the Extension Line drawn from the Reducing Ask Volume Zone high price. 
SG8 Reducing Ask Volume Zone Low Extension Line Use to set the drawing properties for the Extension Line drawn from the Reducing Ask Volume Zone low price.