Volumetric Regression Heatmap

The Volumetric Regression Heatmap indicator creates a visual representation of price distribution relative to a dynamic linear regression channel, helping traders identify liquidity zones and potential mean reversion points through volume weighted data.

Usage

The Volumetric Regression Heatmap is designed to provide a spatial view of where volume accumulates within a trending channel. By visualizing these volume concentrations, users can identify support and resistance zones that are not based on simple horizontal levels, but on the statistical distribution of price and volume over time.

Heatmap Interpretation

The primary visual output is a series of colored bands surrounding a linear regression line. Darker or higher intensity colors indicate higher volume concentration, representing areas where the market has spent more time or traded more heavily. Traders can use these zones to anticipate price slowdowns or potential reversals as the market approaches high volume clusters.

Mean Reversion Signals

When volatility enters a state of contraction, the script automatically generates signals at the upper and lower standard deviation bands. A signal at the lower band may suggest an oversold condition within the regression channel, while a signal at the upper band may suggest an overbought condition. These signals are best utilized when the slope of the regression channel is relatively flat.

Delta Histograms

The top and bottom delta histograms provide insight into aggressive buying and selling pressure. By scaling these bars relative to the channel boundaries, traders can observe real time buying and selling momentum and determine if price moves away from the regression center are supported by significant volume delta.

Details

The indicator calculates a linear regression fit based on a source input and a variable period length. Unlike static channels, this tool features a dynamic period adjustment that expands or contracts based on market volatility (ATR ratio), ensuring the regression fit remains relevant to current market conditions.

The heatmap itself is constructed by binning volume data according to the price distance from the regression line. A Gaussian smoothing algorithm is applied to these bins to create a fluid, readable gradient. The tool also includes a projection feature that extends the regression logic into the future, providing a roadmap for where price is statistically expected to gravitate.

Settings

Core Settings

• Source: Selects the price data (e.g., Close, HL2) used for regression calculations.
• Base Period: Sets the standard number of bars used for the regression fit window.
• Dynamic Auto-Adjusting Period: Enables automatic scaling of the regression period based on volatility, allowing for shorter periods in volatile markets and longer periods in stable markets.

Heatmap Settings

• Grid Rows Each Side: Defines the number of parallel bands plotted above and below the center line.
• Gradient Smoothing: Controls the smoothing factor for the volume profile gradient.
• Heatmap Colors: Allows customization of the color scheme, representing the transition from low volume to high volume areas.

Mean Reversion Signals

• Show Mean Reversion Signals: Toggles the display of buy and sell signals based on standard deviation extremes.
• Signal Band (SD Multiplier): Sets the standard deviation threshold for trigger signals.
• Flat Slope Threshold: Determines the maximum channel height allowable for signals to appear, ensuring trades are taken during consolidation phases.

Delta Histograms

• Show Top/Bottom Delta Histograms: Enables visual bars representing buying and selling volume deltas.
• Histogram Height Scale: Adjusts the vertical reach of the delta bars.
• Histogram Bar Width: Controls the thickness of individual volume delta bars.

Style & Options

• Heatmap Line Width: Sets the thickness of the heatmap bands.
• Future Projection Length: Determines how many bars into the future the heatmap extends.
• Show Volume Profile Histogram: Toggles a bookmap style volume profile on the right edge of the chart.
• Histogram Width: Adjusts the size of the volume profile histogram.

Dashboard

• Dashboard: Enables or disables the on chart statistical summary.
• Position: Sets the location of the dashboard (Top Right, Bottom Right, or Bottom Left).
• Size: Adjusts the scale of the dashboard text.

FAQ

How can I access the Volumetric Regression Heatmap?

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