The chart above shows the excess detector applied on daily JPY Forex data. A reversal or at least an end of the exuberant market move can be expected. To show the found move on the chart, the algorithm waits for another bar, and if this bar does not form a new low for bearish moves or a new high after a bull move, the move is shown on the chart.

Then a trigger value is applied and the algorithm checks if the biggest move found is more than e.g. From this list of moves, normalised in volatility multiples, the algorithm picks the biggest moves.

A standard setting might be to calculate all moves between 5 and 200 bars. After the volatility of the market has been calculated, the algorithm measures all market moves for a given number of bars. All data on the chart, prior to the testing bar, is used. This is how it works:įirst the algorithm calculates a volatility measure. To overcome this restriction and find all excess moves, I did me an indicator which searches for excess moves over multiple intervals. But it does the measure only over a fixed interval setting, thus missing a lot of shorter or longer excess market moves. Therefore, if you compare Wednesday’s volume to the average volume on any day, you may get an incorrect indication.Ĭlassic excess indicators A new algorithm for excess detectionīollinger Bands already has the key ingredient for a useful reversal detector: it measures the market move in standard deviations. For example, the average volume on a Monday might be 15% lower than the average volume on a Wednesday. A simple moving average on volume unfortunately is not time sensitive, thus can not be used for this comparison.Īnother important factor that many traders overlook is that the average traded volume also varies depending on the day of the week. Instead, you should compare the 4 PM volume to the average volume at 4 PM to get a meaningful comparison. For example, the Asian, European, and American sessions in a 24-hour market will likely have different volume profiles, so it would not make sense to compare the volume at 2 AM to the volume at 4 PM to determine if the 4 PM volume is exceptionally high or low. Averaging the volume of all intraday candles is not useful because market conditions vary at different times.

Daily volume analysis using a moving average Intraday Volume AnalysisĪnalyzing intraday volume is not as straightforward.

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