Next Gen Volume Momentum Oscillator For ThinkOrSwim

[justAnotherTrader]

This is the second indicator in my next gen series.
(first one: https://usethinkscript.com/threads/eliteperformers-for-thinkorswim.20982/)
It does what we always want our indicators to do, it takes volume into consideration, adapts to market changes and gives labels for quick action.

VWMO Momentum + Compression Zones Indicator – Explained for Traders
This indicator tracks where volume is flowing — into up days or down days — and combines that with volatility compression to identify high-probability setups before they move.

What It Measures:

• VWMO stands for Volume-Weighted Momentum Oscillator. It looks at recent volume and checks if more of it is coming in on up days vs down days.
• The line moves from 0 to 100:
  • Above 50 = volume favoring up moves (bullish bias)
  • Below 50 = volume favoring down moves (bearish bias)

What Makes It Unique:

• It doesn’t just look at price — it tracks where the smart money is pushing volume.
• It adapts based on volatility:
  • During a tight Bollinger Band squeeze, the indicator pulls the overbought/oversold zones closer to center, helping you catch early reversals before they run.

How to Use It:

• VWMO > upper red dashed band = possibly overbought, but if the trend is up, it could mean strength continuation.
• VWMO < lower green dashed band = possibly oversold, but if price is holding, could be absorption or reversal brewing.
• Watch for "Squeeze Bias" labels – when price is compressed and volume starts leaning one way, the spring is coiling.
• The dynamic labelsgive real-time context:
  • “Momentum Up” = trending and strong.
  • “Overbought Exhaustion” or “Capitulation Risk” = fading moves.
  • “Absorption Zone” = price holding while volume recovers (bullish potential).
  • “Early Bull Reversal” = first uptick from deep oversold with rising slope.
  • “Bear Divergence” = volume rising but price stalling — risk of pullback.

This tool may help determine the direction bollinger band squeezes. When bands are compressed watch for volume to be on the top half of the oscillator for a potential breakout. I am not familiar with any tools that currently do a good job predicting squeeze directions

In the following picture I actually took this trade when the dashed lines converged and the volume line stayed steady above it. Note it is the first time ive traded with it

declare lower;

input length = 14;
input percentileLookback = 63;       # VWMO percentile window
input volatilityLookback = 63;        # BBW percentile window
input bbLength = 20;
input bbNumDev = 2.0;

# --- VWMO Core Calculation ---
def upVol = if close > close[1] then volume else 0;
def downVol = if close < close[1] then volume else 0;
def upVolSum = Sum(upVol, length);
def downVolSum = Sum(downVol, length);
def totalVol = upVolSum + downVolSum;
def VWMO = if totalVol != 0 then 100 * upVolSum / totalVol else 50;

plot VWMO_Line = VWMO;
VWMO_Line.SetDefaultColor(Color.CYAN);

# --- Percentile Approximation for VWMO ---
def maxVWMO = Highest(VWMO, percentileLookback);
def minVWMO = Lowest(VWMO, percentileLookback);
def rangeVWMO = maxVWMO - minVWMO;

def OB_raw = minVWMO + rangeVWMO * 0.75;
def OS_raw = minVWMO + rangeVWMO * 0.25;

# --- Bollinger Band Width for Volatility ---
def bbBasis = Average(close, bbLength);
def bbDev = StDev(close, bbLength);
def bbUpper = bbBasis + bbNumDev * bbDev;
def bbLower = bbBasis - bbNumDev * bbDev;
def BBW = (bbUpper - bbLower) / bbBasis;

def maxBBW = Highest(BBW, volatilityLookback);
def minBBW = Lowest(BBW, volatilityLookback);
def rangeBBW = maxBBW - minBBW;
def BBWPercentile = if rangeBBW != 0 then (BBW - minBBW) / rangeBBW else 0;

# --- Compression Logic ---
def compressionFactor = if BBWPercentile < 0.25 then (0.25 - BBWPercentile) / 0.25 else 0;

def OB_dynamic = OB_raw - (OB_raw - 50) * compressionFactor;
def OS_dynamic = OS_raw + (50 - OS_raw) * compressionFactor;

plot OB_Band = OB_dynamic;
OB_Band.SetDefaultColor(Color.RED);
OB_Band.SetStyle(Curve.SHORT_DASH);

plot OS_Band = OS_dynamic;
OS_Band.SetDefaultColor(Color.GREEN);
OS_Band.SetStyle(Curve.SHORT_DASH);

# --- Label Logic with Smart Absorption and Trend Filters ---
def overbought = maxVWMO;
def oversold = minVWMO;
def priceSlope = LinearRegressionSlope(close, 5);
def absorptionCondition = VWMO < oversold and (close > close[1] or priceSlope > 0);

AddLabel(yes,
    if VWMO > overbought and priceSlope > 0 then
        "VWMO: " + Round(VWMO, 1) + " | Momentum Up"
    else if VWMO > overbought and priceSlope <= 0 then
        "VWMO: " + Round(VWMO, 1) + " | Overbought Exhaustion"
    else if VWMO < oversold and priceSlope < 0 then
        "VWMO: " + Round(VWMO, 1) + " | Capitulation Risk"
    else if absorptionCondition then
        "VWMO: " + Round(VWMO, 1) + " | Absorption Zone"
    else if VWMO > VWMO[1] and VWMO[1] < oversold and priceSlope >= 0 then
        "VWMO: " + Round(VWMO, 1) + " | Early Bull Reversal"
    else if VWMO < VWMO[1] and priceSlope > 0 then
        "VWMO: " + Round(VWMO, 1) + " | Bear Divergence"
    else if VWMO >= 45 and VWMO <= 55 then
        "VWMO: " + Round(VWMO, 1) + " | Neutral Volume"
    else
        "VWMO: " + Round(VWMO, 1),
    if VWMO > overbought and priceSlope > 0 then Color.GREEN
    else if VWMO > overbought and priceSlope <= 0 then Color.RED
    else if VWMO < oversold and priceSlope < 0 then Color.DARK_RED
    else if absorptionCondition then Color.LIGHT_GREEN
    else if VWMO > VWMO[1] and VWMO[1] < oversold and priceSlope >= 0 then Color.CYAN
    else if VWMO < VWMO[1] and priceSlope > 0 then Color.ORANGE
    else if VWMO >= 45 and VWMO <= 55 then Color.GRAY
    else Color.WHITE
);

def isSqueezing = compressionFactor > 0;
AddLabel(isSqueezing and VWMO > 55, "Squeeze Bias: Bullish", Color.GREEN);
AddLabel(isSqueezing and VWMO < 45, "Squeeze Bias: Bearish", Color.RED);

mod note:
classified with Buy Sell Volume Pressure Indicators