The EEdge-Volume Indicator
EEdge-Volume
This indicator extracts information that deals with volume at the Bid/Ask, as well as a cross-compiling price action to yield three pieces of information useful to traders. First is the buying and selling pressure, telling us the direction and intensity of the buyers and sellers and when the price action and the volume disagree. Second this indicates when and where there is possibly an extreme buy/sell print happening and extreme pressure (Emotional Exhaustion or EE) typically can't be sustained very long. Lastly price exhaustion is measured and plotted to indicate when both volume and price are exhausting, confirming an expected stall, correction or reversal.. By identifying the "where" in combination with the "context" of price action we can start to assume the intent, meaning they possibly exhausted in this specific location. This, in combination with the other EEdge non-correlated indicators, assist in obtaining or confirming the trade bias and specific entry or exit location.
EEdge-Volume
This indicator extracts information that deals with volume at the Bid/Ask, as well as a cross-compiling price action to yield three pieces of information useful to traders. First is the buying and selling pressure, telling us the direction and intensity of the buyers and sellers and when the price action and the volume disagree. Second this indicates when and where there is possibly an extreme buy/sell print happening and extreme pressure (Emotional Exhaustion or EE) typically can't be sustained very long. Lastly price exhaustion is measured and plotted to indicate when both volume and price are exhausting, confirming an expected stall, correction or reversal.. By identifying the "where" in combination with the "context" of price action we can start to assume the intent, meaning they possibly exhausted in this specific location. This, in combination with the other EEdge non-correlated indicators, assist in obtaining or confirming the trade bias and specific entry or exit location.
"Why is this useful?" you might ask. Well, Let's start here.
Merriam-Webster Dictionary defines Volume in the following way:
- volume, [vol-yoom, -yuh m], noun "a mass or quantity, especially a large quantity, of something:"
So here's how it works... As the market moves, numbers of traders (or volume!) are buying or selling contracts. If this is where it would end, we would have some useful information, namely the overall volume traded in an area. The EEdge-Volume indicator however does not simply plot volume. It evaluates the buying and selling individually at the bid and the ask as executed, then holds this for evaluation against the price. Once this volume at bid/ask and price are compared we can come up with a value which when exceeded signifies extreme bid/ask volume, thereby having our first indication of Emotional Exhaustion (EE). This then can be plotted on the indicator (default is yellow, but configurable) itself within one bar of current price action. Simultaneously, price is analyzed by the same algorithm and identifies the similar Irrational Exuberance by the action. This will be identified by exhaustion dots, but this time by the price exhaustion and on the chart not the indicator. When volume and price exhaustion occur at the same time a powerful signal occurs identifying an increased probability of an area in which price may stall or reverse.
One last signal is displayed and that is one of divergence between the volume at bid/ask and the price action itself. Some divergences are plotted on the indicator (red and cyan dots), but even without this print the volume "pressure" line printed in the sub-graph will show increasing or decreasing pressure that can be identified real time. Seeing volume exhaustion followed by a price exhaustion, then followed up with a price test that includes a lower volume test (definition of divergence!) gives the trader additional confidence that a stall or reversal has an increased probability of occurring.
Combining this indicator with the other complimentary EEdge Indicators increases the power of EEdge-Volume even more!
...part of the EminiEdge 5 Step Plan to Trade the Emini S&P...