High Volume Spike Reversal Indicator

[skynetman]

Running on real time ES 12-08 it seems to me that this indicator still needs to be tuned a bit.
Look at the wrong trend it sent a long signal.

[davem1979]

Hi Skynetman,

Yes, I agree. This Volume Spike indicator does need to be tuned and some conditions should be added or altered to actually use it in a trading system. I am hoping that this thread will serve to explore ways in which we can better this indicator as well as our understanding of volume and price action.

From what Operandi has mentioned about Volume and Price action and it being the best tools for his automated system, I am curious if he has some fresh ideas or price action conditions that may improve this indicator.

One way we can explore volume and price action is to look at total volume and the range of the bars. Secondly, we can look at Bid/Ask Volume or Delta.

We could make our conditions more specific, to achieve fewer signals, but better signals.

We could start by exploring Wide Range Bars with Low, Normal and High Volume. If you notice, many times when a wide range bar closes off the lows for instance in the middle of the range on very high volume, this may signal demand at the lows, and the high volume is most likely demand entering the market and thus causing price to then turn around.

Or, what usually happens when bars that have very high volume and have a range less that the previous two bars, a high higher than the previous bar and close below the close of the previous bar? Generally, these narrow range bars with High Volume, show supply stepping in the market at highs pushing price down. A possible direction change is probable...

[skynetman]

Ok David, but even if delta and bid/ask is interesting, the fact that as today NT can't save and store it (not even in market replay) makes impossible to backtest anything. Even marketdelta.com indicators work real time only in NT.

I think it's best to work on volume a bit more and wait for nt7 end of year (hey ben, there will be that improvement right? ?)

[NinjaTrader_Ben]

Hello,

I cannot say for sure as of yet. I know it is on the list of possibilities. Sorry I am not more help here.

[skynetman]

David, any particular reason to use LOW/HIGH instead of CLOSE to check if price is falling/rising?

Why do you check on previus bar volume instead of current one?
Volume[1]>MAX(Volume,period)[2]

[davem1979]

Hi Skynetman,

I was not aware of the Bid/Ask limitations in Ninja Trader at the moment, since I just started using it. I was hoping the Bid/Ask Volume would be able to be saved. But, now I realize it isn't possible at the moment. As of now, I am just keeping my charts on all the time, although my computer crashed and I lost 4 days of bid/ask info...such is life...I can't complain about that which is free at the moment...I'll have to start paying for charting very soon.

It's nice to see that customer service will include this in the upcoming additions.

As for choosing the Low vs. the Close to determine if prices are rising or falling. Now that you point it out, that may be a nice addition. When I was visually putting the indicator together, the lows and the highs are what stuck out to me. But, using the close, we will be able to filter out different scenarios.

I chose to reference high volume 1 bar ago, because I wanted to see a confirmation bar of price turning around.

If you are interested in getting a base level of seeing if this indicator could be profitable as is running a backtest, you could set it so that after a long signal a buy stop is placed 1 tick above the signal bar high and for a short signal a sell stop is placed 1 tick below the signal bar low. Maybe for the ES, you could use a 6 tick stop and a 3 tick profit target. For a 3 lot strategy, you could take first profit at 3 ticks, move stop in 3 ticks, so at worst you end up break even minus commissions, then take profit at 6 ticks, and at 8 ticks. It would be interesting to see where it's at. If you have some other ideas about that, I'd love to hear.

[skynetman]

david i think for now we have to check with 1 contract and fine tune the algorithm for best winning factor.
Then we can add some scaling profit taking algo....

[PrTester]

Ok David, but even if delta and bid/ask is interesting, the fact that as today NT can't save and store it (not even in market replay) makes impossible to backtest anything. Even marketdelta.com indicators work real time only in NT.

I think it's best to work on volume a bit more and wait for nt7 end of year (hey ben, there will be that improvement right? ?)

Well guys maybe this post from Ben can help: http://www.ninjatrader-support.com/v...2&postcount=99

[mrlogik]

FYI about Bid / Ask and NT7

Read post 109

http://www.ninjatrader-support.com/vb/showthread.php?t=4231&page=8

Also, thanks to Ben, this is a Delta Buy / Sell indicator

http://www.ninjatrader-support.com/vb/showthread.php?t=4231

[Operandi]

Ok David, but even if delta and bid/ask is interesting, the fact that as today NT can't save and store it (not even in market replay) makes impossible to backtest anything.

This isn't correct actually. You can extract bid and ask volumes from market replay data. Indicators such as CumulativeVolumeorTick and BuySellVolume are working perfectly well on data that I recorded yesterday.

However the NT version of MarketDelta volume footprint doesn't work on market replay data, probably because of limitations in the way it is coded.

Incidentally this is a great tool for manually accessing and understanding bid/ask and delta information, although variables from the indicator are not available for use in strategies (though all the information can be derived programmatically from NT anyway. The challenge lies in the way that the data is presented.)

Look at the code in the BuySellVolumeTop indicator as an example of accessing and sumating bid/ask volume, and thereby calculating deltas.

Chris

[Lusitano]

Hi All,

A fellow coder (justlurkin) on www.traderslaboratory.com created a nice version of this indicator.

You can find the Ninja Trader indicator attached, as well as the code at the link below.

http://www.traderslaboratory.com/forums/f56/high-volume-spike-reversal-indicator-development-4515.html

Please feel free to add your thoughts on how we can improve this indicator.

Best,
David

Thank you for sharing this indicator. I am testing it just scalping for a point each trade on a 466 tick chart and the results are very interesting. I still need to test quite a bit more but this concept is very interesting and usable. Have you come up with anything new regarding this indicator lately?

Lusitano

[davem1979]

Hi Lusitano,

Recently, I have started looking at the usability of the High Volume Spike Reversal Indicator, and when I initially thought about it, I was using it more as a study tool to help point out the high volume areas to see what was happening at these potential turn around areas, as my question was, "What is the effect of high volume on price?"

In terms of using it as a stand alone indicator, I think it would need much more development to account for things such as the range of bars, and support and resistance. I would also like to explore this tool along with monitoring the delta of each bar.

Now, I am looking at volume on different time frames, such as the 1min, 5min, and 30min charts around S/R areas, and looking not only at volume but at the range of the bars.

For instance, if I see price coming down on increasing volume into a known demand area, and the 1 min bars are decreasing in range, possibly closing off the lows--- what that is telling me is that demand is entering stopping/absorbing the selling pressure and potentially creating a turn around.

Another way I look at Volume is looking to see when a high/low has formed on high volume, and when price approaches that high/low again on lower volume, I look for volume/range to decrease near those areas, essentially telling me that traders don't have interest in higher/lower prices, and there's a good probability that fading those highs/lows is possibly a good idea.

David

[nkhoi]

VOL spike + bar range = foundation of VSA (volume spread analyzer)method from TradeGuider people.

[davem1979]

Hi Nkhoi,

Are you using Tradeguider software? And, if so, do you find it helpful in finding nice setups?

Also, are there some principals or ideas of VSA that you might be able to share that would be of interest to this thread and possibly to the development of the high volume spike indicator?

Many thanks,
David

[nkhoi]

no way I can sum up the VSA method, on a chart you see only a price and a high vol bar but there is alot of analysis going on behind each bar.

this video went over vol spike analysis

http://tinyurl.com/c8xpks