Volume Oscillator
By LuxAlgoApr 13, 2020
The Volume Oscillator measures the difference between a fast and a slow moving average of volume, expressed as a percentage of the slow average, to show whether trading activity is expanding or contracting. Above zero, recent volume runs ahead of its longer-term baseline; below zero, participation is drying up. This is the standard raw form of the volume oscillator: a 5-period EMA of volume measured against a 10-period EMA, plotted as a single line around a dashed zero line.
How to Trade the Volume Oscillator?
- Oscillator above zero: activity running above its recent baseline. Moves in either direction carry participation, and range breaks are better supported.
- Oscillator below zero: activity below baseline. Pullbacks on negative readings tend to read corrective, while breakouts attempted on them deserve suspicion.
- Rising slope: participation building into a developing move, often a more useful read than the sign itself.
- Zero crosses: the moment expansion turns to contraction or back, an activity regime marker, not a price signal.
The oscillator carries no directional information of its own: an aggressive sell-off expands it exactly as a strong rally does, so every reading needs the price event it accompanies.
Volume Oscillator Settings
- Fast Length (default 5): the fast EMA of volume; shortening it makes the oscillator snap to single sessions, and a climactic print inflates the fast average for days.
- Slow Length (default 10): the slow EMA serving as the baseline; lengthening steadies the comparison so expansions register longer, shortening lets the baseline chase activity and mutes readings.
Alerts
Two alert conditions: Zero Cross Up when the oscillator turns positive, Zero Cross Down when it turns negative.
Frequently Asked Questions
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