This indicator places a marker on a chart, based on a divergence between trade volumes and bar sizes, i.e., if bar size has been decreasing/increasing for N continuous bars and volume has been doing the opposite, a marker will be placed.
Usually the markers are placed near the peaks before a reverse or in the middle of a technical correction during a trend. This indicator can be used to identify potential entry or exit points, depending on the configuration of input parameters. VDM does not provide complete information about potential trades, if used without other indicators.
Higher input variables values mean less frequent signals. I am currently experimeting on how the false signals can be filtered. Also, a complementary indicator, which shows the direction in which the positions should be opened, is currently in development. Feel free to post your suggestions about improving this indicator.
The lines on the second image are NOT a part of the indicator and are drawn for demonstration purposes, however I can implement them in the code if someone asks.
- Whether or not zero bar should be counted.
- Convergence or divergence switch (convergence creates markers if both volume and bar sizes are moving in the same direction; divergence – in the opposite).
- How long the volume has to incerase/decrease to trigger the marker (in bars).
- How long the bar size has to increase/decrease to trigger the marker (in bars).
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Click below to downloadVolume Divergence Markers (VDM)