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Volume near Price Level - Detect Strong Support & Resistance Areas
Volume near price is a technical indicator that returns the total volume near the current price level that occurred in previous periods. For each period, the indicator calculates the total volume of the previous N period where the close price was between the current price and a threshold value (+-). The higher the indicator value the more shares were traded near the current price level and this also indicates that the current level is a potential strong support or resistance.
The trading indicator lets you define the lookback and threshold values. Example:
dis1 = avg(high - low, 300);
a = VolumeNear(300, dis1);
The lookback period is set to 300 and the threshold value is set to the average distance between the high and low prices.
Here is an example that shows you how to detect a strong support area:
- First, I calculate the price position within the high/low area to determine whether we are near a potential support or a resistance.
- Then I measure the strength of the support by checking the "VolumeNear" indicator value with its highest value over the last 100 periods.
The formula to detect a strong support area is:
period = 300;
dis1 = avg(high - low, period);
a = VolumeNear(period, dis1);
closeposition = ((close - llv(low, 100)) / (hhv(high, 100) - llv(low, 100)));
support1 = (a == hhv(a, 100)) and closeposition < 0.3;
plot(support1, "Support Area", colorRed, ChartLine, StyleOwnScale);
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
