Normalised Volume Oscillator [BackQuant]

Normalised Volume Oscillator

A refined evolution of the Klinger Volume Oscillator, rebuilt for clarity, precision, and adaptability. This tool normalizes volume-driven momentum into a bounded scale so you can easily identify shifts in accumulation and distribution across any asset or timeframe, while keeping readings comparable between markets.

What this indicator does
The Normalised Volume Oscillator quantifies the balance between buying and selling pressure using the Klinger Volume Oscillator (KVO) as its base, then rescales it dynamically into a normalized range between -0.5 and +0.5. This normalization allows traders to interpret relative strength and exhaustion in volume flow, rather than dealing with raw unbounded values that differ across symbols.

It is a momentum-volume hybrid that reveals the strength of trend participation: when buyers dominate, normalized readings rise toward +0.5; when sellers dominate, they fall toward -0.5. The midline (0) acts as an equilibrium between accumulation and distribution.

Core components

• Klinger Volume Oscillator: The foundation of this indicator, combining volume with price trend direction to measure long-term money flow relative to short-term movement.
  
• Normalization process: The raw KVO is scaled over a user-defined Normalisation Period, computing `(KVO - lowest) / (highest - lowest) - 0.5`. This centers all readings around zero, allowing overbought/oversold detection independent of asset volatility or volume magnitude.
  
• Signal moving average: The normalized KVO is smoothed with a user-selectable moving average type—SMA, EMA, DEMA, TEMA, HMA, ALMA, and others. This becomes the signal line for confirmation of trend direction or mean-reversion setups.
  

How it works conceptually

1. The KVO detects when volume supports price movement (bullish) or diverges from it (bearish).
2. The script normalizes the raw KVO so that relative magnitude is consistent—what is “strong buying pressure” looks the same on BTCUSD as it does on AAPL.
3. Overbought and oversold regions are derived statistically, rather than from arbitrary values, based on percentile zones around ±0.4 and ±0.5.
4. The oscillator is optionally combined with a moving average to help identify crossovers, momentum shifts, and divergence confirmation.

How to interpret it

• Above 0: Indicates dominant buying pressure and likely continuation of upward momentum.
  
• Below 0: Suggests dominant selling pressure and potential continuation of downward movement.
  
• Crosses of 0: Often mark transitions between accumulation and distribution phases.
  
• +0.4 to +0.5 zone: Overbought region where buying intensity is stretched; watch for deceleration or divergence.
  
• [-0.4 to -0.5 zone: Oversold region indicating panic or exhaustion in selling.
  
• Signal-line crossover: A traditional momentum confirmation method; when the normalized KVO crosses above its moving average, buyers regain control, and vice versa.
  

Why normalization matters
Typical volume oscillators are asset-specific—what is considered “high” volume for one symbol is not the same for another. By dynamically normalizing KVO values within a rolling lookback, this version transforms raw amplitude into a standardized scale. This means you can:

• Compare multiple assets objectively.
  
• Set consistent alert thresholds for overbought/oversold regions.
  
• Avoid misleading interpretations from absolute oscillator values.
  

Customization and UI

• Moving Average Type & Period: Select your preferred smoothing method (SMA, EMA, TEMA, etc.) and adjust its period to tune sensitivity.
  
• Normalisation Period: Defines how many bars the KVO range is measured over; shorter periods adapt faster, longer ones smooth more.
  
• Visual Toggles:
  
  * Show Oscillator: enables or hides the core histogram.
  * Show Moving Average: adds a smoothed overlay for signal confirmation.
  * Paint Candles: optional color overlay for chart candles based on oscillator direction.
  * Show Static Levels: displays ±0.4 and ±0.5 zones for overbought/oversold boundaries.
  

How to use it

1. Trend confirmation: Use midline (0) crossovers as confirmation of emerging trend shifts—cross above 0 suggests a new bullish phase, cross below 0 a bearish one.
   
2. Reversal spotting: Look for normalized readings reaching ±0.5 and flattening, or diverging against price extremes.
   
3. Divergence analysis: When price makes a new high but the normalized oscillator fails to, it signals waning buying conviction (and vice versa for lows).
   
4. Multi-timeframe integration: Works best alongside higher timeframe trend filters or moving averages; normalization makes this consistent.
   

Alerts
Prebuilt alert conditions allow quick automation:

• Midline crossovers (0): transition between accumulation and distribution.
  
• Overbought (+0.4) and Oversold (-0.4) triggers for potential exhaustion.
  
• Signal moving-average crosses for confirmation entries.
  

Tips for use

• Combine with price structure—don’t fade every overbought/oversold reading; confirm with break of structure or candle patterns.
  
• Use longer normalization periods for position trading, shorter for intraday analysis.
  
• In choppy markets, treat 0-line oscillations as noise filters, not trade triggers.
  

Summary
The Normalised Volume Oscillator modernizes the classic Klinger Volume Oscillator by normalizing its readings into a standardized range. This makes it more adaptive across assets and timeframes, improves interpretability, and provides intuitive, data-driven overbought/oversold levels. Whether used standalone or as a confirmation layer, it offers a clearer view of volume dynamics—revealing when markets are truly being accumulated, distributed, or stretched beyond their sustainable extremes.