Volume Indicators

Volume Indicators
Volume indicators are those that account for the volume. For the Forex market 'volume' means
number of ticks (price changes) that appeared in the time interval. For stock securities volume
means the volume of executed trades (in contracts or money terms).
The following volume indicators are available in the trading platform:
 Accumulation/Distribution
 Money Flow Index
 On Balance Volume
 Volumes
Accumulation/Distribution
Accumulation/Distribution Technical Indicator is determined by the changes in price and
volume. The volume acts as a weighting coefficient at the change of price — the higher the
coefficient (the volume) is the greater the contribution of the price change (for this period of
time) will be in the value of the indicator.
In fact, this indicator is a variant of the more commonly used indicator On Balance Volume.
They are both used to confirm price changes by means of measuring the respective volume of
sales.
When the Accumulation/Distribution indicator grows, it means accumulation (buying) of a

particular security, as the overwhelming share of the sales volume is related to an upward trend
of prices. When the indicator drops, it means distribution (selling) of the security, as most of
sales take place during the downward price movement.
Divergences between the Accumulation/Distribution indicator and the price of the security
indicate the upcoming change of prices. As a rule, in case of such divergences, the price
tendency moves in the direction in which the indicator moves. Thus, if the indicator is growing,
and the price of the security is dropping, a turnaround of price should be expected.
Calculation
A certain share of the daily volume is added to or subtracted from the current accumulated value
of the indicator. The nearer the closing price to the maximum price of the day is, the higher the
added share will be. The nearer the closing price to the minimum price of the day is the greater
the subtracted share will be. If the closing price is exactly in between the maximum and
minimum of the day, the indicator value remains unchanged.
A/D(i) =((CLOSE(i) - LOW(i)) - (HIGH(i) - CLOSE(i)) * VOLUME(i) / (HIGH(i) - LOW(i)) +

A/D(i-1)
Where:
A/D(i) — value of the Accumulation/Distribution indicator for the current bar;

CLOSE(i) — close price of the bar;
LOW(i) — the lowest price of the bar;
HIGH(i) — the highest price of the bar;
VOLUME(i) — volume;
A/D(i-1) — value of the Accumulation/Distribution indicator for the previous bar.
Money Flow Index

Money Flow Index (MFI) is the technical indicator, which indicates the rate at which money is
invested into a security and then withdrawn from it. Construction and interpretation of the
indicator is similar to Relative Strength Index with the only difference that volume is important
to MFI.
When analyzing the money flow index one needs to take into consideration the following points:
 divergences between the indicator and price movement. If prices grow while MFI falls (or
vice versa), there is a great probability of a price turn;
 Money Flow Index value, which is over 80 or under 20, signals correspondingly of a
potential peak or bottom of the market.
Calculation
The calculation of Money Flow Index includes several stages. At first one defines the typical
price (TP) of the period in question:
TP = (HIGH + LOW + CLOSE) / 3
Then one calculates the amount of the Money Flow (MF):
MF = TP * VOLUME
If today’s typical price is larger than yesterday’s TP, then the money flow is considered positive.
If today’s typical price is lower than that of yesterday, the money flow is considered negative.
POSITIVE MONEY FLOW is a sum of positive money flows for a selected period of time.
NEGATIVE MONEY FLOW is the sum of negative money flows for a selected period of time.
Then one calculates the money ratio (MR) by dividing the positive money flow by the negative
money flow:
MR = POSITIVE MONEY FLOW / NEGATIVE MONEY FLOW

And finally, one calculates the money flow index using the money ratio:
MFI = 100 - (100 / (1 + MR)
Where:
HIGH — the highest price of the current bar;

LOW — the lowest price of the current bar;
CLOSE — close price of the current bar;
VOLUME — volume of the current bar.
On Balance Volume
On Balance Volume Technical Indicator (OBV) is a momentum technical indicator that relates
volume to price change. The indicator, which Joseph Granville came up with, is pretty simple. If
the close price of the current bar is higher than that of the previous bar, the volume of the current
bar is added to the previous OBV. If the current bar close price is lower than of the previous one,
the current volume is subtracted from the previous OBV.
The basic assumption, regarding On Balance Volume analysis, is that OBV changes precede
price changes. The theory is that smart money can be seen flowing into the security by a rising
OBV. When the public then moves into the security, both the security and the On Balance
Volume will surge ahead.
If the security’s price movement precedes OBV movement, a "non-confirmation" has occurred.
Non-confirmations can occur at bull market tops (when the security rises without, or before, the
OBV) or at bear market bottoms (when the security falls without, or before, the On Balance
Volume Technical Indicator).
The OBV is in a rising trend when each new peak is higher than the previous peak and each new
trough is higher than the previous trough. Likewise, the On Balance Volume is in a falling trend
when each successive peak is lower than the previous peak and each successive trough is lower
than the previous trough. When the OBV is moving sideways and is not making successive highs
and lows, it is in a doubtful trend.
Once a trend is established, it remains in force until it is broken. There are two ways in which the
On Balance Volume trend can be broken. The first occurs when the trend changes from a rising
trend to a falling trend, or from a falling trend to a rising trend.
The second way the OBV trend can be broken is if the trend changes to a doubtful trend and
remains doubtful for more than three days. Thus, if the security changes from a rising trend to a
doubtful trend and remains doubtful for only two days before changing back to a rising trend, the
On Balance Volume is considered to have always been in a rising trend.
When the OBV changes to a rising or falling trend, a "breakout" has occurred. Since OBV
breakouts normally precede price breakouts, investors should buy long on On Balance Volume
upside breakouts. Likewise, investors should sell short when the OBV makes a downside
breakout. Positions should be held until the trend changes.
Calculation
If the current close price is higher than the previous one, then:
OBV (i) = OBV (i - 1) + VOLUME (i).
If the current close price is lower than the previous one, then:
OBV (i) = OBV (i - 1) - VOLUME (i)
If the current close price is equal to the previous one, then:
OBV (i) = OBV (i - 1)
Where:
OBV (i) — value of the On Balance Volume indicator in the current period;
OBV (i - 1) — value of the On Balance Volume indicator in the previous period;
VOLUME (i) — volume of the current bar.
Volumes
For the Forex market, Volumes is the indicator of the number of price changes within each
period of a selected timeframe. For stock symbols this is an indicator of actually traded volumes
(contracts, money, units, etc.)
Bars of the indicator have two colors. The green color means that the volume of the current bar is
larger than that of the previous one. The red color means that the volume of the current bar is
smaller than the volume of the previous bar. The indicator colors, as well as its application to
tick or real volumes are set in the indicator parameters.

Volume Indicators

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Volume Indicators

The following volume indicators are available in the trading platform:

When the Accumulation/Distribution indicator grows, it means accumulation (buying) of a

A/D(i) =((CLOSE(i) - LOW(i)) - (HIGH(i) - CLOSE(i)) * VOLUME(i) / (HIGH(i) - LOW(i)) +

A/D(i) — value of the Accumulation/Distribution indicator for the current bar;

Money Flow Index

TP = (HIGH + LOW + CLOSE) / 3

Then one calculates the amount of the Money Flow (MF):

MR = POSITIVE MONEY FLOW / NEGATIVE MONEY FLOW

MFI = 100 - (100 / (1 + MR)

HIGH — the highest price of the current bar;

OBV (i) = OBV (i - 1) + VOLUME (i).

OBV (i) = OBV (i - 1) - VOLUME (i)

If the current close price is equal to the previous one, then:

OBV (i) = OBV (i - 1)

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