Stopping Volume Finder (Reversals)

The Stopping Volume Finder (Reversals) indicator identifies potential market reversals by detecting high-volume candles that suggest stop-loss hunting or liquidity clearing. It provides visual cues to help traders anticipate shifts in trend direction based on volume anomalies relative to price action.

Usage

The tool is designed to highlight specific "Stopping Volume Candles" (SVCs) where the volume significantly exceeds the average, yet the price action shows signs of exhaustion or rejection.

• Green Down Arrow: Indicates a potential bullish reversal. This often occurs when high volume enters the market at the bottom of a move, suggesting buyers are absorbing selling pressure.
• Red Up Arrow: Indicates a potential bearish reversal. This suggests that high volume at the top of a move is being met with significant sell orders.
• Dual Arrows: If both colors appear or arrows clear liquidity from both sides, the market is likely to seek the nearest significant area of interest (liquidity pool).

Traders often find the best results on the 5-minute and 15-minute timeframes during high-volatility periods like the London and New York sessions. It is recommended to use these signals in conjunction with support and resistance levels, Moving Averages (20, 50, 200 EMAs), or momentum oscillators like the Market Cipher B to confirm divergences.

Details

The script functions by comparing current bar volume against a 10-period Simple Moving Average (SMA) multiplied by a factor of 1.49. To qualify as a "Stopping Volume" event, the candle must not only meet this volume threshold but also exhibit specific body-to-wick ratios. Specifically, it looks for candles where the body is relatively small compared to the wicks (less than 30%), indicating that despite high trading activity, the price failed to sustain movement in the direction of the trend, signaling a "stop" in momentum.

Settings

• Volume Threshold (Internal): The script uses a hardcoded 1.49x multiplier on a 10-period SMA of volume to define "high volume" spikes.
• Body Ratio (Internal): A 0.30 (30%) threshold is used to ensure the candle body is small enough relative to the wicks to signify price rejection or absorption.

FAQ

How do I use the Stopping Volume Finder (Reversals)?

Look for the colored arrows on your chart; a green arrow suggests a bullish reversal opportunity, while a red arrow suggests a bearish one. Always confirm these signals with structural levels like previous highs/lows.

What are the best timeframes for this tool?

While it can be used on any timeframe, it is optimized for intraday scalping and day trading on the 5M and 15M charts during major market sessions.

How can I access Stopping Volume Finder (Reversals)?

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