Volume Delta Trailing Stop

The Volume Delta Trailing Stop indicator utilizes Lower Time Frame (LTF) volume delta data to determine potential trading entries and employs a Volume-Delta based trailing stop-line for managing stops effectively.

How to Trade with the Volume Delta Trailing Stop Indicator?

The 'Volume Delta Trailing Stop' provides insights for potential entries and stop loss lines. A significant feature is the trigger line, which must be broken for a position to be initiated. Once this occurs, a Volume Delta-governed trailing stop-line is established to adjust for market movements.

Entry and Trailing Stop Mechanics

A notable aspect is the establishment of a trigger line. Upon its breach, a Volume Delta-controlled trailing stop-line is created:

Understanding the Details

Volume Dynamics

Volume Increase and Trade Execution

When orders are executed at the opening price, they are contingent upon available supply, impacting volume yet not always moving the price. When the opening and closing prices are identical, this is seen as "neutral volume" (nV), distinguishing it from "up" or "down" volume.

Example: A buy order fills part of the available supply, setting the opening price. If by the closing time, there's no price movement yet significant volume, it's deemed as "neutral volume" (nV).

Delta Volume (ΔV)

Delta Volume is derived by subtracting "down volume" from "up volume".

• Standard volume turns red if the closing price is lower than the opening price (= "down volume").
• Volume becomes green if the closing price is higher or equal to the opening price, marking it as "up volume".

Handling Neutral Volume

Settings determine whether "Neutral Volume" is treated as "Up-Volume", influencing whether it appears as green ‘buy’ volume.

Illustrative Example

Consider the period from 29 July, 10:00 to 10:05 UTC on a 5-minute chart with an opening of 29311.28 and a closing of 29313.89.

• Here, the closing is higher than the opening, coloring the volume (39.55) green as "up volume".

A deeper dive into a 1-minute timeframe divides the period into more bars, showing a clearer volume direction:

(ΔV = +15.51)

Zooming further into a 1-second timeframe exposes even deeper details, where certain bars show volume without price change, marked as "light green" representing "neutral volume".

(ΔV = -0.35)

Interestingly, despite more volume as price declines, the price ascended during these five minutes.

- Key Observation: Divergence between LTF volume and price direction results in visual cues:
   - orange bar: Price uptrends but LTF volume declines.
   - blue bar: Price downtrends but LTF volume trends upwards.

When the "up volume" splits into "up" and "neutral", the differentiation becomes pronounced:

(ΔV = -12.76; "up" - "down")

Key Trading Concepts

bullishBear = red bar, but LTF volume upwards -> blue bar
bearishBull = green bar, but LTF volume downwards -> orange bar

Setting the Trigger Line

In absence of position, the Volume Delta Trailing Stop monitors divergence between price and volume direction closely. Upon detection, a Trigger-line forms:

• Appears at high for a blue bar scenario (bullishBear).
• Appears at low for an orange bar scenario (bearishBull).

A crucial next step is the breach of the Trigger-line:

• Bearish Position: Closing price cuts below the grey Trigger-line.

Trailing Stop Implementation

Once the Trigger-line is violated, the Trailing Stop-line functions dynamically:

• Moves to low in bullish positions.
• Shifts to high in bearish positions.

Choose settings ideally to determine if close price or high/low levels should break the Trigger-line.

Alerts activate on any alert() function call, signaling:

• 'signal up' for bullish positions
• 'signal down' for bearish positions

Adjustments occur when:

• For Bullish Positions: Blue bullishBear appears -> lowest of {low, previous highest blue, or lowest orange}
• For Bearish Positions: Orange bearishBull appears -> highest of {high, previous highest blue, or lowest orange}

When alerts are active and the TS-line is compromised, the system will notify:

• 'TS-line broken down' for exit from bullish positions
• 'TS-line broken up' for exit from bearish positions

Identifying Reference Points

By default, price direction judgment comes from comparing closing prices against opening prices. Equal open and close prices indicate "neutral volume".

You may opt to compare against "previous close", aligning with built-in volume indicator settings. If the close is equivalent to open, yet below the previous close, it's negatively marked ("down volume"). Conversely, a positive mark ("up volume") goes if the close exceeds the previous close.

This setting applies uniformly across the current and Lower timeframes:

• Based on Open

• Based on Previous Close

Adjustment Strategies

Adjust TS-line based on a percentage of price, or a true range multiple:

• Default Setting: No adjustment (Δ line - Adjustment 0)

• Percentage-Based Adjustment: e.g., 0.03% price adjustment

• True Range Multiplication: Scaling adjustments by a factor like 10

Customizing Indicator Settings

Lower TimeFrame (LTF) Selection

Identify your preferred LTF - options range from 1 second (1S) to 1 minute.

Trigger Options

Define the Breaker: Choose between close or H/L (High when bullish, Low when bearish).

Δ Line Adjustments (Trailing Stop-line)

Establishing personal preferences:

• Adjustment: Default adds/subtracts based on a "percentage of price"
• True Range Multiplier: Adjusts per a "true range multiple"

Comparison Basis

Decide criteria for competing prices:

• With open
• With previous close

Viewing Neutral Volume as "Up-Volume"

Drive how "neutral volume" is treated - whether it’s considered an upward "buy" green indicator.

Important Considerations

Detailed Lower TimeFrame Analysis

Opt for the finest LTF (1S) data for heightened detail nearing tick data. Note, however, a ceiling limitation of 100,000 intrabars in calculations.

This may restrict visibility on higher timeframes, like daily charts – necessitating alternative approaches. Opt for a "lower chart timeframe" or a "higher LTF" (e.g., 5S, 10S).

LTF Selection Compliance

Ensure chosen LTFs are consistently less than the current chart timeframe.

Pine Script™ and Repainting Awareness

Due to different calculations possible in historical vs. real-time bars, repainting may occur in scripts using request.security_lower_tf().

FAQ

How can I access the Volume Delta Trailing Stop Indicator?

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

What is the significance of “Neutral Volume”?

Neutral volume signifies periods where the closing and opening prices are the same, showing neither upward nor downward pressure in trading.

How does the indicator accommodate different trading styles?

With customizable settings like timeframe selection, trigger, and stop adjustments, traders can tailor the indicator for swing trading, scalping, or other strategies.