Relative Strength of Volume Indicators by DGT

The Relative Strength of Volume Indicators indicator provides a multi-faceted momentum analysis by applying the Relative Strength Index (RSI) concept to standard volume-based metrics to reveal underlying supply and demand dynamics. It integrates price-based RSI, volume-based RSI, relative volume histograms, and volume-weighted bar coloring into a single comprehensive tool.

Usage

The Usage section describes how the script can be used to identify momentum shifts and volume intensity. Users can compare the traditional price RSI with a volume-derived RSI to spot divergences or confirmations. For example, if price RSI makes a new high but the Volume RSI (RSI(VOL)) fails to do so, it may indicate weakening participation in the current trend.

The tool features several components to assist in interpretation:

• Volume RSI Selection: Users can choose between Accumulation Distribution, Elder's Force Index, Money Flow Index, On Balance Volume, or Price Volume Trend as the foundation for the volume RSI calculation.
• Relative Volume Histogram: This provides a visual representation of current volume relative to its average. High "RVOL" bars highlight significant market participation, often preceding volatility or structural breaks.
• Volume-Weighted Price Bars: This feature colors the main chart bars based on volume intensity. Bright colors indicate high participation, while muted colors suggest lower interest relative to the moving average.

Details

The script applies the standard RSI formula to volume-based indicators rather than price data. This transformation helps filter out price noise and focuses on the "effort" (volume) behind the "result" (price).

Technical implementation details:

• Smoothing: The indicator utilizes a Least Squares (Linear Regression) smoothing method on the RSI outputs. This reduces jagged movements while maintaining responsiveness to directional shifts.
• Zones: Traditional overbought (75–65) and oversold (35–25) thresholds are highlighted. The 50-level serves as the equilibrium point to distinguish between bullish and bearish momentum.
• Volume Modes: The histogram can be toggled between standard Relative Volume, a 4-color context mode, or two variations of Buying/Selling volume splits to visualize net pressure.

Settings

• Apply RSI To: Selects the volume indicator (e.g., OBV, MFI, EFI) used for the volume RSI calculation.
• RSI Length: Sets the lookback period for the RSI calculations.
• RSI Smoothing: Adjusts the length of the Least Squares smoothing applied to the RSI lines.
• Histogram Mode: Chooses the visualization style for the volume data (Relative Volume, 4-color, or Buy/Sell pressure).
• Histogram Companion: Adds a Moving Average or Volume Oscillator line to the histogram for additional context.
• Histogram Height: Adjusts the vertical scale of the histogram plots.
• Volume-Weighted Price Bars: Enables or disables the coloring of chart bars based on volume intensity.

FAQ

How do I interpret a divergence between Price RSI and Volume RSI? A divergence occurs when price momentum (Price RSI) moves in one direction while volume momentum (Volume RSI) moves in the opposite. For instance, if price hits a new high but Volume RSI makes a lower high, it suggests the upward move lacks strong participation and may be prone to reversal.

What do the different colors in the 4-color Volume Histogram mean? In the 4-color mode, bars are colored based on whether the close was higher or lower than the open, and whether the current volume is above or below its historical average. Bright green or red bars indicate high-volume moves, while gray bars indicate volume below the average.

How can I access the Relative Strength of Volume Indicators? You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.