One of my favourite technical indicator’s for support and resistance is Volume By Price.
The volume by price indicator shows you the level of trading volume relative to the price of your focus security. For example, if you are charting IBM and you apply the Volume by Price indicator, BigCharts will create a bar chart on top of the price chart showing the distribution of trading volume at different price levels for IBM.
This is useful in determining where the majority of historical trading volume occurred and may help you find meaningful support and resistance lines.
Support lines are used to determine at what price buyers are likely to come into the market and support a stock. Resistance lines are used to determine at what price sellers may unload their stock thereby driving the stock price lower. Remember, these are very subjective measures and by no means is the Volume by Price indicator sufficient in and of itself to mark either support or resistance lines.
Money flow is an other volume indicator.
The Money Flow indicator attempts to measure the amount of money buying a stock vs. the amount of money selling a stock. It does this by assuming that when a stock closes higher than its open, all volume associated with that trading period results from buyers. It further assumes that when a stock closes lower than its open, all volume associated with that trading period results from sellers. Although these assumptions are overly simplistic, money flow can be a useful indicator when analyzing the general buying and selling pressure on a stock.
In his book, John A Bollinger (2001): “Bollinger on Bollinger Bands” has a whole chapter, 18, about volume indicators where he states that volume indicators are the most important group of indicators that go directly into the heart of the supply demand equation that is more or less independent of pure price indicators. Abother not so well known indicator is volume-weighted price average. The VWAP indicator line is like a magnet. It can be regarded as fair value stock price.
VWAP is like an equilibrium price or the fair value of a company. This is an alternative to the moving median pure price. More in this short article. Market price, fair value, true price, median price etc.
VWAP also helps determine the target price for a particular asset, helping traders determine when to enter or exit a position. VWAP restarts at the opening of each new trading session, and is thus considered a single-day indicator. That is for day traders, while traders trading on a lower frequency data like weekly, monthly or quarterly data restart the indicator each monday, or first trading day of the month or quarter.
We noted in the video above that Brian Shannon used the TC2000 software. I asked Google Bard if there is other platforms that hase these indicators.
Prompt to Bard: which platforms have the vwap OR a vwap indicator
Answer:
The VWAP and AVWAP indicators are available on a number of different trading platforms. Here are a few of the most popular platforms that include these indicators:
- TradingView: TradingView is a popular charting platform that offers a wide variety of technical analysis indicators, including the VWAP and AVWAP. You can add these indicators to your charts with just a few clicks, and you can customize their appearance and settings to your liking.
- TrendSpider: TrendSpider is a premium charting platform that is known for its advanced technical analysis tools. The VWAP and AVWAP indicators are included in TrendSpider’s suite of tools, and you can use them to identify trends, support and resistance levels, and potential trading opportunities.
- Nirvana Systems: Nirvana Systems is a company that specializes in developing technical analysis indicators. They offer a VWAP Power Suite that includes a variety of VWAP-based indicators and strategies. The AVWAP Drawing Tool is also available from Nirvana Systems, and it allows you to easily plot AVWAP lines on your charts.
- NinjaTrader: NinjaTrader is a popular trading platform that is known for its customizable charting capabilities. The VWAP and AVWAP indicators are available as part of NinjaTrader’s standard charting package, and you can easily add them to your charts with just a few clicks.
In addition to these dedicated trading platforms, the VWAP and AVWAP indicators are also available on some cryptocurrency exchanges. For example, Binance offers a VWAP indicator for its Binance Futures platform.
No matter which platform you use, the VWAP and AVWAP indicators can be valuable tools for identifying trends, support and resistance levels, and potential trading opportunities.
Semantic links
Investopedia | Volume-Weighted Average Price (VWAP): Definition and Calculation
Corporatefinanceinstitute | Volume Weighted Adjusted Price (VWAP)
Sofi | Complete Guide to the Volume-Weighted Average Price Indicator (VWAP)
Brian Shannon’s YouTube channel.
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