This indicator is based on the ideas about Volume Spike Analysis written about by Vincent Kott in his book Volume Spike Analysis. Formulas are presented in the book for another platform, but I wrote the script based on the charts he provided.
The indicator basically takes out the noise and colors bars based on factors of time and volume for day. There are three different time periods you can set: Short, Medium, Long. Each period can be set with a different color. The period value looks for highest volume bar within that period. If today's volume bar is the hightest value, it colors the volume bar based on the formatted color. It does not matter if the price bar is up or down. The defaults are 4 days, 20 days, 100 days. There is also a volume moving average available to show or hide based on you trading style.
The purpose is to easily see changes in volume. Typically, you would like to see volume rising as a new trend begins. This will show up quickly as you will see a cluster of rising red and / or purple bars.
I've been looking for ways to fine tune my ES trading and have been incorporating volume as a way to filter noise. This indicator looks really good - well done.
It would be cool if the candle color changed based on the volume spike, or if there were an indicator above/below the candle. I'm not too good at Pine but maybe I'll play with it. I think that would be helpful, keeping my eyes in one place.
OTMRob
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This is great, thanks!
Bornleader
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Sir ts really good indicator buy when implementing it how to use the strategy how to use it for exact entry exits pls and suggestions pls
SheldonPatnett
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@Bornleader, that's really for you to decide. Have you read the book? :)