Simple Volume-Based Support & Resistance Indicator

The Simple Volume-Based Support & Resistance Indicator tool provides a dynamic way to identify key market levels by integrating price action with trading volume and volatility.

Usage

The indicator displays two primary zones on the chart: a green support zone and a red resistance zone. Traders can use these zones to identify potential reversal points or areas where price momentum may stall. Because the calculations factor in volume, the zones expand during high-activity periods, indicating more significant price areas, and contract during low-volume periods.

• Support Zones (Green): When price approaches or enters the green zone, it indicates a potential floor where buying pressure may increase.
• Resistance Zones (Red): When price approaches or enters the red zone, it indicates a potential ceiling where selling pressure may increase.
• Trend and Volatility: The indicator automatically adjusts its sensitivity based on current ATR values, meaning the zones will appear wider during high-volatility environments and narrower during low-volatility phases.

Details

The script operates by calculating a dynamic multiplier based on current volume relative to its 20-period simple moving average. If the current volume exceeds the average, a "High Volume Multiplier" is applied; otherwise, a "Low Volume Multiplier" is used.

Furthermore, the script assesses the market's volatility state using the Average True Range (ATR) divided by the typical price. Depending on whether the market is in a low, normal, or high volatility state, the volume multipliers are scaled accordingly. This ensures that the support and resistance levels remain relevant regardless of market conditions. Finally, a smoothing period is applied to the levels to prevent erratic movements and provide a cleaner visual output.

Settings

Multiplier Settings

• High Volume Multiplier: Determines the distance of the levels when current volume is above the average volume.
• Low Volume Multiplier: Determines the distance of the levels when current volume is below the average volume.

Calculation Settings

• Smoothing Period: The number of bars used to smooth the dynamic support and resistance lines.
• ATR Period: The lookback period used for the Average True Range calculation to determine volatility.

Volatility Multipliers

• Low Volatility Multiplier: Scaling factor applied to levels when the market is in a low-volatility state.
• Normal Volatility Multiplier: Scaling factor applied during standard market conditions.
• High Volatility Multiplier: Scaling factor applied during periods of extreme price movement.

FAQ

How do I use the support and resistance zones for entries?

The zones are often used as areas to look for price action confirmation, such as bullish or bearish reversals, rather than as static buy or sell signals on their own.

Does this indicator work on all timeframes?

Yes, the script uses relative volume and ATR, making it adaptable to various timeframes from intraday charts to daily or weekly views.

How can I access this indicator?

You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.