On Balance Volume & Accumulation Distribution Ribbon
Feb 28, 2023
The On Balance Volume & Accumulation Distribution Ribbon indicator combines volume-weighted momentum with a multi-layered moving average ribbon to identify trend direction and potential market reversals through price-volume divergences.
Usage
The indicator can be used to visualize the flow of volume behind price action. When the ribbon turns green, it indicates positive volume accumulation and an uptrend; when it turns red, it indicates distribution and a downtrend.
Users should look for the following signals:
- Trend Following: Observe the expansion and contraction of the 11 Double Exponential Moving Averages (DEMA). A broad, green ribbon suggests a strong bullish trend.
- Regular Divergences: Indicated by triangles, these suggest a potential trend reversal when price and volume momentum disagree.
- Hidden Divergences: Indicated by circles, these typically suggest trend continuation.
Details
The script calculates a custom OBVAD value using the formula: volume * (close - open) / (high - low) * hlcc4. This cumulative value is then smoothed using 11 different DEMA periods (ranging from 5 to 377). By using DEMA instead of standard EMA, the indicator reduces lag while maintaining smoothness. The final output provides a comprehensive view of volume momentum across multiple lookback periods simultaneously.
Settings
- Pivot Lookback Right/Left: Sets the number of bars required to confirm a pivot point for divergence detection.
- Max/Min of Lookback Range: Defines the window of bars within which the script searches for previous pivots to calculate divergences.
- Plot Bullish/Bearish: Toggles the visibility of regular bullish and bearish divergence labels.
- Plot Hidden Bullish/Bearish: Toggles the visibility of hidden bullish and bearish divergence labels.
FAQ
How do I use the On Balance Volume & Accumulation Distribution Ribbon?
You can use it to confirm the strength of a trend by looking at the ribbon color or to spot early signs of reversals using the automated divergence shapes (triangles and circles).
What is the difference between the triangles and circles?
Triangles represent regular divergences, which often signal a potential reversal in the current trend. Circles represent hidden divergences, which usually signal that the prevailing trend is likely to continue.
How can I access this tool?
You can get access on the LuxAlgo Library for charting platforms like TradingView, MetaTrader (MT4/MT5), and NinjaTrader for free.
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