Volume price action and reaction index V1.0 (VPARI V1.0)

The Volume price action and reaction index V1.0 (VPARI V1.0) indicator provides a unique perspective on market dynamics by measuring the strength of volume changes relative to specific price action movements to confirm trade entries.

Usage

The VPARI indicator is primarily used to identify the underlying pressure behind price movements. Each candle on the indicator oscillator represents a calculated measure of volume strength based on the relationship between the open, high, low, and close prices.

• Trade Confirmation: Use the color of the indicator candles to confirm trend direction. Green candles suggest bullish volume pressure, while red candles suggest bearish volume pressure.
• Divergence Analysis: One of the most effective ways to use this tool is by identifying divergences. A positive divergence occurs when price makes a lower low but the VPARI makes a higher low, suggesting a potential bullish reversal. Conversely, a negative divergence occurs when price makes a higher high but the VPARI makes a lower high.
• Asset Suitability: This indicator is optimized for use with Cryptocurrencies and Stocks. It is generally not recommended for use with commodities due to different volume dynamics.

Details

The VPARI calculation utilizes multiple mathematical equations to partition volume into "Up" and "Down" components. It evaluates the position of the candle body relative to its range (high-low) and compares the current open to the previous close to categorize volume pressure.

The script calculates cumulative values for these volume components to create a total pressure index. This index is then transformed into a Money Flow-style oscillator (0-100 range) using the ratio of cumulative gains and losses in the total pressure value. This transformation allows the volume data to be visualized as a candle chart within a separate pane, making it easier to spot price/volume anomalies.

Settings

• Indicator Color (Visual Only): The indicator uses hardcoded colors within the script logic to represent bullish (#089981) and bearish (#f23645) states.
• Alerts: The script includes built-in alert conditions for when the VPARI sentiment turns Bullish or Bearish, which can be configured to trigger once per bar close.

FAQ

How do I interpret the candle colors on the VPARI?

Green candles indicate that the total volume pressure is increasing compared to the previous bar, signaling bullish momentum. Red candles indicate decreasing total pressure, signaling bearish momentum.

Which markets work best with this tool?

The indicator is designed for high-volume markets like major stocks and cryptocurrencies where price action and volume have a strong correlation.

How can I access the VPARI V1.0?

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