Volume Divergence indicator for intraday trading

zeek

zeek

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I trade almost exclusively intraday and one of my strategies to find a trend reversal (top) is to look for volume divergence. What i mean by that is when the price bar increase whereas the volume bar decrease and i use this on the 1min timeframe (see pic).
That's why i am looking for an indicator that looks for this behavior and gives an indication. Preferably a label that turns into a strong color when the divergence is spotted and when there is no divergence happening, it fades into a grey:ish color instead. And if it would be possible to add an audio alert too, that would be perfect.

In order to not get too many "false" indications, the divergence should be at least 10%, maybe even higher.

Can this be done? Would be extremely helpful for me.

 
BenTen

BenTen

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There are several divergence indicators on this site which include the RSI and MACD. However, I don't think there is any for Volume Divergences yet. You might have to do that manually. :(
 
BenTen

BenTen

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I found this indicator, though. Give it a try.

Code:
# Price Volume Divergence
# Mobius
# Chat Room Request 09.10.2014

declare lower;

def price = close;
def vol = volume;

script Scale {
    input c = close;
    input Min = .01;
    input Max =   1;
    def hh = HighestAll(c);
    def ll   = LowestAll(c);
    plot Range = (((Max - Min) * (c - ll)) /  (hh - ll)) + Min;
}

plot NormPrice = Scale(c = price).Range;
NormPrice.SetDefaultColor(Color.Green);
plot NormVolume = Scale(c = vol).Range;
NormVolume.SetDefaultColor(Color.Red);
plot mean = if isNaN(close) then Double.NaN else .5;
mean.SetDefaultColor(Color.White);

def cond1 = normprice < mean;
def cond2 = normprice > mean;

def cond3 = normvolume < mean;
def cond4 = normvolume > mean;

addlabel(cond1, "Negative Price Convergence", color.red);
addlabel(cond2, "Positive Price Convergence", color.green);

addlabel(cond3, "Negative Volume Convergence", color.red);
addlabel(cond4, "Positive Volume Convergence", color.green);

addlabel(normprice > 0.9, "Price overbought", color.red);
addlabel(normprice < 0.1, "Price oversold", color.green);
 
BenTen

BenTen

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@zeek How many bars would you consider the divergence to be valid? Working on the indicator right now.

Would these count as divergences?


 
zeek

zeek

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Yes, those would definitely count as divergences but i would actually only need it for 1 bar. I use this strategy mostly on gap & extension moves and in those cases, the trend reversal almost always happens after a vol divergence on a single bar.

But maybe if it would be possible to also add an option in settings to choose how many bars to look for. Like 1, 3 and 5 maybe?

I just tried the Mobius script and i really don't like the plot lines in his script. Would much rather only have labels and possibly an audio alert.

Thanks for trying @BenTen
 
BenTen

BenTen

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Here's a quick rough draft so far.


 
M

Mordoor

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This is what I have been looking for also. Looking forward to the release.
 
M

Mordoor

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@BenTen When will you be releasing the above mentioned script?
 
BenTen

BenTen

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@zeek Sorry about the delay. Should be up by tonight :)
 

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