Anti-Volume Stop Loss

The Anti-Volume Stop Loss indicator provides a dynamic, volatility-adjusted trailing stop loss based on the inverse relationship between price and volume to help traders manage risk objectively. By incorporating volume characteristics into a technical exit strategy, it aims to keep traders in healthy trends while tightening the leash when volume conviction wanes.

Usage

The Usage section describes how the script can be used to manage risk and identify potential exit points. The indicator outputs a series of crosses on the chart representing the stop-loss level.

• Trend Management: When a security is in a healthy uptrend with positive volume characteristics, the AVSL typically provides more room to avoid whipsaws.
• Risk Tightening: If price action continues upward but volume begins to contract or show weakness, the AVSL calculation tightens, moving the stop level closer to the current price to protect profits.
• Volatility Adaptation: Unlike fixed percentage stops, the AVSL uses Bollinger Band-style logic to adjust to the specific volatility of the asset, granting more room to volatile assets like tech stocks and tighter stops to stable assets.

Details

The Anti-Volume Stop Loss (AVSL) is based on the concepts introduced by Buff Pelz Dormeier in "Investing with Volume Analysis." It integrates support levels, volatility, and the Volume Price Confirmation Indicator (VPCI) to create an intelligent exit point.

The implementation follows a quantitative formula where the lookback length and the standard deviation are dynamic:

• Length: The lookback period for the price average is determined by the VPCI value, typically rounding $(3 + VPCI)$.
• Price Component: The calculation utilizes the lows of the bars adjusted by the Volume Price Confirmation (VPC) and Volume Price Ratio (VPR).
• Standard Deviation: The width of the stop is influenced by the product of the VPCI and Volume Multiplier (VM), ensuring that volume strength directly dictates the "breathability" of the stop.

Settings

Main Settings

• Fast average: Sets the period for the short-term volume-weighted moving average and simple moving average calculations.
• Fast Price type: Determines the source (e.g., Close, Low) used for the fast average calculations.
• Slow average: Sets the period for the long-term volume-weighted moving average and simple moving average calculations.
• Slow Price type: Determines the source used for the slow average calculations.
• Signal: Defines the signal length used for the internal VPCI calculations.
• StdDev: Adjusts the multiplier for the standard deviation component, controlling how loose or tight the stop is relative to volatility.
• Offset: Shifts the plot forward or backward on the chart for visual alignment.

FAQ

How do I use the AVSL for different trading styles?

For short-term trading, the script can be applied to daily charts. For intermediate or long-term positions, it is recommended to apply the indicator to weekly or monthly timeframes respectively to align with the investment objective.

Why does the stop-loss level sometimes move away from the price?

The AVSL is designed to give a position more room if the price-volume relationship is healthy. If volume is confirming the price move, the stop may loosen to avoid being triggered by temporary market noise.

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.