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Date/Time: Tue, 23 Oct 2018 02:08:55 +0000

Post From: Offering To The Community: On Balance Volume By Tick With Filters

[2015-07-19 13:15:18]
bjohnson777 (Brett Johnson) - Posts: 239
In doing some tests I've discovered that I like a moving average ribbon on it. I've added that as a feature. New version attached.

From the "Display Study Documentation" button:

On Balance Volume By Tick With Filters. To properly use this indicator, Sierra Chart must be set up in tick by tick mode with intraday bars. If all "Input Data" options show a straight line at 0.0, then tick by tick data is not available or not enabled. Note that some volume data is only available when the market is open.

This OBV version adds a moving average ribbon to help quantify the moves. Reading the ribbon is the same as if the ribbon was attached to a price line. If the ribbon is enabled, it is recommended to give it a lot of screen height to see the movement. Adding it to a second chart may be a better option. Institutional traders do use moving average lines as seen by the OBV line bending, pausing, and reversing at the standard levels. The colors chosen are based on light frequency from slow to fast (think of a prism or rainbow). This method makes remembering the values much easier. Standard values are red=200, orange=100, yellow=50, green=35, and cyan=20. These can all be changed in the configuration menu.

This OBV version has a Volume Filter option to handle cases when a volume spike smashes the indicator making it hard to read. Large institutions sometimes do this to hide their activity afterward. The "Straight" option passes volume data through without any filtering. The "Log" option runs each volume bar through the log function making a type of "log scale". The "Square Root" option runs each volume bar through the square root function making a type of "square root scale". The "MA Clip" option will clip volume above a chosen moving average. The final Smoothing option will apply a moving average to take some of the noise out of the final OBV line.

Observations. The various volume filters are very effective and will walk right through the volume spike bar hardly noticing it. The volume filters also tend to minimize errant graph changes.

When using one of the volume filters, it is necessary to have the first OBV instance running in "Straight" mode. Add the second OBV instance to the same graph with "Independent Scaling". This is important because the filtered bars tend to drift in value with smaller volume bars. While this drift will show the OBV bias direction, it will not do it to scale and may cause false signals. The "Straight" instance will be used to verify actual distance moved. Note that Log tends to drift the most (sometimes offering an early indicator), followed by Square Root and then MA Clip. To learn the movement characteristics of each, put them all on one chart for equal comparison.

Take note when all OBV lines pivot in the same direction. This tends to indicate a change with strength.

Edit: Download current version from first post.
Date Time Of Last Edit: 2016-02-07 03:00:49