Directional Volume Estimate from Price Action (D_VESPA)

The Directional Volume Estimate from Price Action (D_VESPA) indicator is a volume-based tool designed to estimate the split between buying and selling volume by analyzing price action and bar geometry. It aims to provide Volume Price Analysis (VPA) enthusiasts with actionable insights into supply and demand dynamics without requiring lower timeframe data.

Usage

The Usage section focuses on interpreting the relationship between estimated demand, supply, and net volume to identify market modes.

• Market Sentiment: When the green "Demand" line is above the red "Supply" line, the market is generally in a bullish mode. Conversely, when Supply exceeds Demand, the mode is bearish.
• Net Volume Histogram: This provides a clear view of the balance of power. A move above zero indicates a transition to bullish momentum, while a move below zero suggests bearish control.
• NetVol Bars: These 3-color bars offer a visual summary of volume flow. They can be used to identify trend strength and potential exhaustion points based on price-volume convergence or divergence.
• Multi-Timeframe Analysis: Users can enable the Secondary TF NetVol plot to align lower timeframe trades with higher timeframe trends (e.g., viewing 1-hour net volume on a 5-minute chart).
• Alerts: The script includes built-in alerts for zero-line crosses and supply/demand crossovers, allowing traders to stay informed of shifts in market mode.

Details

The indicator operates on the core assumption that price movement reflects volume distribution. It calculates the estimated volume split by examining wicks, bodies, and price gaps:

• Wicks: Both bulls and bears are allocated volume based on the total wick range.
• Body: For up-bars, the body volume is allocated to bulls; for down-bars, it is allocated to bears.
• Gaps: Price gaps between bars are factored into the calculation to improve accuracy during volatile openings or news events.
• Smoothing: These estimates are processed through a selected Moving Average (SMA, EMA, RMA, or WMA) and further smoothed to create reliable trend lines.

Settings

Main Settings

• Volume Length: The lookback period used for the initial volume calculations.
• Average type: The type of moving average applied to the volume data (SMA, EMA, RMA, or WMA).
• Smoothing: The length of the secondary smoothing applied to the Demand and Supply lines.
• Volume Weighted: Enables weighting by actual volume data. Should remain enabled for standard use.
• 2-bar Gap Impact: Includes price gaps between the previous close and current open in the estimation.

Visual Settings

• Show NetVol Bars: Toggles the visibility of the colored volume-based price bars.
• Show NetVol Histogram: Toggles the visibility of the central net volume histogram.

Secondary TF

• Show Secondary: Enables the plot for a higher timeframe's Net Volume.
• TF: Selects the timeframe for the secondary calculation (1W, 1D, 1H, or Chart).
• Length / Smooth: Specific period and smoothing settings for the secondary timeframe calculation.

FAQ

How do I interpret the Supply and Demand lines?

When the green Demand line rises and crosses above the red Supply line, it indicates increasing buyer dominance. If the lines converge while the price continues to move, it may signal a potential divergence or trend weakness.

Can this indicator be used on symbols without volume data?

Yes. If a symbol lacks volume data (such as some Forex pairs or indices), the indicator will automatically default to an estimated ratio based on the price bar's shape and range.

How can I get access to D_VESPA?

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