Confluence Trend and Fibo Reversal SystemAn In-Depth Overview of the "Confluence Trend and Fibo Reversal System"
Introduction: The Purpose and Core Architecture
The "Confluence Trend and Fibo Reversal System" is a sophisticated, highly adaptable Pine Script trading indicator designed to dynamically navigate fluctuating market conditions. The primary objective of this script is to solve a fundamental problem in technical analysis: the tendency of trend-following indicators to produce false signals during sideways markets, and the failure of mean-reversion oscillators during strong trends. To achieve this, the indicator operates as a dual-regime trading algorithm. It constantly analyzes price action to determine whether the current market environment is trending or ranging (sideways). Based on this real-time assessment, the script autonomously switches its internal logic, deploying either a momentum-based confluence engine for trends or a reversal-based engine strictly filtered by Fibonacci retracement levels for sideways markets.
Operating Mechanisms: How the Indicator Generates Signals
The technical architecture of this indicator is divided into four distinct analytical engines that work together to validate trading signals.
1. The Market Regime Filter (Range Detection)
Before any signal is generated, the system calculates a "Range Score" to determine the market state. It evaluates six specific technical conditions:
ADX (Average Directional Index): Checks if the ADX value is below 25, indicating weak trend strength.
Bollinger Bands Position: Verifies if the closing price is contained securely within the upper and lower bands.
Bollinger Bandwidth (BBW): Measures volatility by checking if the current bandwidth is narrower than its 20-period moving average.
RSI (Relative Strength Index): Checks if the RSI is hovering in a neutral zone between 40 and 60.
Stochastic Oscillator: Confirms that the Stochastic K-line is resting in a non-extreme zone between 20 and 80.
EMA Convergence:Measures the gap between the 20-period and 50-period Exponential Moving Averages, checking if they are tightly converged within half of the Average True Range (ATR).
If the total score meets a user-defined threshold (defaulting to 4 out of 6), the system classifies the market as "Ranging" and activates the Reversal engine; otherwise, it defaults to the Trend engine.
2. The Trend Engine (Confluence Scoring)
When the market is clearly trending, the script relies on a strict multi-indicator confluence system to prevent premature entries. It generates a bullish or bearish score out of five possible points:
Price positioning relative to the 50-period EMA.
Directional dominance using the ADX (+DI vs -DI).
Momentum confirmation via MACD baseline crossovers.
Trend alignment with the Supertrend indicator.
Price placement above or below the Ichimoku Kumo Cloud.
A final buy or sell signal in trend mode is only triggered if the accumulated score meets the "Minimum Confluence Score" threshold (defaulting to 4 out of 5).
3. The Reversal & Fibonacci Engine
If the market is ranging, the script hunts for mean-reversion opportunities by scanning for specific price action anomalies and oscillator extremes. It looks for Bullish/Bearish Engulfing candles, Pinbars (Hammers and Shooting Stars), RSI overbought/oversold crossovers, Stochastic extreme crossovers, and Bollinger Band boundary breakouts.
Crucially, these reversal patterns are deemed invalid unless they occur in close proximity to an automatically generated Fibonacci level. The script identifies the highest high and lowest low over a 100-bar lookback period to draw dynamic Fibonacci retracement lines (0.000 to 1.000). A reversal signal is only approved if the price action happens within a tight percentage tolerance zone around these key Fibonacci levels.
4. The Retest Engine
To drastically reduce false breakouts, the script features a built-in "Retest Mode". Instead of firing a buy or sell signal immediately when conditions are met, the script calculates a target "retest price" offset by an ATR multiplier. It will then hold the pending signal in memory for a maximum number of candles (defaulting to 4). The final execution signal is only printed on the chart if the price pulls back to successfully retest this calculated ATR level, proving the validity of the breakout.
Implementation and Usage Guidelines
Recommended Settings
Trade Direction: It is highly recommended to leave the trade direction set to "Both" to allow the dynamic regime filter to operate at its full potential. However, if trading against a higher timeframe macroeconomic trend, users can restrict the system to "Buy Only" or "Sell Only".
Retest Mode: Keep "Enable Retest Mode" activated. While it may cause you to miss trades that instantly aggressively rally, it will save you from substantial losses caused by "fake-out" signals.
Confluence Threshold: For aggressive traders, lowering the Trend Minimum Confluence Score to 3 will yield more signals. For conservative traders, leaving it at 4 or 5 ensures that only the highest probability momentum shifts are traded.
Visual Enhancements: Keep the "Highlight Range Market Background" enabled. This feature turns the chart background orange during sideways markets, providing excellent visual context as to why the indicator is currently ignoring standard trend breakouts.
Suitable Markets and Timeframes**
Because the "Confluence Trend and Fibo Reversal System" actively adapts to volatility and structural shifts rather than relying on static logic, it is exceptionally versatile. It is well-suited for high-liquidity markets such as major Forex pairs (EUR/USD, GBP/USD), large-cap Cryptocurrencies (Bitcoin, Ethereum), and major Equity indices. Due to its reliance on 100-period lookbacks for Fibonacci mapping and 50-period EMAs for trend detection, the indicator performs optimally on medium to higher timeframes—specifically the 1-Hour (H1), 4-Hour (H4), and Daily (D1) charts—where market noise is minimal, and true institutional support and resistance zones are respected. Indicator
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Proximal Range Filter [LuxAlgo]The Proximal Range Filter indicator provides a robust range/noise-filtering solution that utilizes an L1 soft-thresholding approach to determine market trends while minimizing lag and erratic price movements.
🔶 USAGE
The indicator is primarily used to identify the current trend direction and significant price shifts while ignoring minor market noise. It appears as a colored line on the price chart, transitioning between bullish and bearish states.
🔹 Trend Identification
Users can determine the current market sentiment by looking at the color of the filter line and the associated gradient fill:
A green line and fill indicate a bullish trend, suggesting that price is consistently overcoming the upper noise threshold.
A red line and fill indicate a bearish trend, suggesting that price is consistently breaking below the lower noise threshold.
🔹 Trend Switches
The indicator plots "Trend Switch Dots" at the specific point where a trend reversal is confirmed. These dots appear at the previous filter level to highlight the origin of the new trend direction. This visual cue helps traders identify the exact moment the filter "stepped" in a new direction.
🔹 Responsiveness and Volatility
By adjusting the inputs, traders can tailor the filter to different trading styles:
For high-volatility assets (like Crypto), increasing the ATR Multiplier can help filter out "fakeouts" that occur during consolidation.
In trending markets, a higher Adaptation Rate (μ) allows the filter to track price changes more aggressively once the noise threshold is exceeded, reducing lag.
A lower ATR Multiplier combined with a lower Adaptation Rate creates a more "stepped" filter, useful for identifying major support/resistance levels created by the filter's flat periods.
🔶 DETAILS
The core of this indicator is the L1 Proximal Filter logic. Unlike standard moving averages that react to every price tick, this filter uses a "Soft-Thresholding" mechanism to isolate meaningful price action from random volatility.
🔹 Calculation Logic
The filter operates through a specific prediction-adaptation cycle:
Noise Threshold : The script calculates a dynamic threshold using a 200-period ATR multiplied by the user-defined setting. This ensures the filter's sensitivity scales automatically with the asset's current volatility.
State Prediction : The algorithm predicts the next state based on the previous filtered value and the current velocity (the rate of change).
Adaptive Blending : The prediction is blended with the new incoming source data using the Adaptation Rate (μ). This creates a temporary "candidate" value for the filter.
Soft-Thresholding : The difference between the candidate value and the previous filter state is evaluated. If the absolute difference is less than the threshold, the velocity is set to zero (the filter remains flat). If it exceeds the threshold, the threshold value is subtracted from the absolute difference to calculate the "meaningful" signal.
This mathematical approach ensures that only price movements strong enough to overcome the statistical noise (the ATR threshold) result in a change to the filter's value.
🔹 Trend Switch Dots
The Trend Switch Dots are plotted with a -1 offset. This is because a trend change is only confirmed once the current bar's filter value moves relative to the previous bar. The dot marks the price level where the "breakout" from the previous noise range occurred.
🔶 SETTINGS
Source : The price data used for calculation (typically the Close price).
ATR Multiplier : Defines the noise threshold. Higher values require larger price movements to change the filter's value, resulting in a smoother output that ignores more "whipsaws."
Adaptation Rate (μ) : Controls how fast the internal prediction adapts to price changes. A value of 1.0 reacts most aggressively to new data, while lower values provide more smoothing during the adaptation phase.
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ATR RopeATR Rope is inspired by DonovanWall's "Range Filter". It implements a similar concept of filtering out smaller market movements and adjusting only for larger moves. In addition, this indicator goes one step deeper by producing actionable zones to determine market state. (Trend vs. Consolidation)
> Background
When reading up on the Range Filter indicator, it reminded me exactly of a Rope stabilization drawing tool in a program I use frequently. Rope stabilization essentially attaches a fixed length "rope" to your cursor and an anchor point (Brush). As you move your cursor, you are pulling the brush behind it. The cursor (of course) will not pull the brush until the rope is fully extended, this behavior filters out jittery movements and is used to produce smoother drawing curves.
If compared visually side-by-side, you will notice that this indicator bears striking resemblance to its inspiration.
> Goal
Other than simply distinguishing price movements between meaningful and noise, this indicator strives to create a rigid structure to frame market movements and lack-there-of, such as when to anticipate trend, and when to suspect consolidation.
Since the indicator works based on an ATR range, the resulting ATR Channel does well to get reactions from price at its extremes. Naturally, when consolidating, price will remain within the channel, neither pushing the channel significantly up or down. Likewise, when trending, price will continue to push the channel in a single direction.
With the goal of keeping it quick and simple, this indicator does not do any smoothing of data feeds, and is simply based on the deviation of price from the central rope. Adjusting the rope when price extends past the threshold created by +/- ATR from the rope.
> Features & Behaviors
- ATR Rope
ATR Rope is displayed as a 3 color single line.
This can be considered the center line, or the directional line, whichever you'd prefer.
The main point of the Rope display is to indicate direction, however it also is factually the center of the current working range.
- ATR Rope Color
When the rope's value moves up, it changes to green (uptrend), when down, red (downtrend).
When the source crosses the rope, it turns blue (flat).
With these simple rules, we've formed a structure to view market movements.
- Consolidation Zones
Consolidation Zones generate from "Flat" areas, and extend into subsequent trend areas. Consolidation is simply areas where price has crossed the Rope and remains inside the range. Over these periods, the upper and lower values are accumulated and averaged together to form the "Consolidation Zone" values. These zones are draw live, so values are averaged as the flat areas progress and don't repaint, so all values seen historically are as they would appear live.
- ATR Channel
ATR Channel displays the upper and lower bounds of the working range.
When the source moves beyond this range, the rope is adjusted based on the distance from the source to the channel. This range can be extremely useful to view, but by default it is hidden.
> Application
This indicator is not created to provide signals, or serve as a "complete" system.
(People who didn't read this far will still comment for signals. :) )
This is created to be used alongside manual interpretation and intuition. This indicator is not meant to constrain any users into a box, and I would actually encourage an open mind and idea generation, as the application of this indicator can take various forms.
> Examples
As you would probably already know, price movement can be fast impulses, and movement can be slow bleeds. In the screenshot below, we are using movements from and to consolidation zones to classify weak trend and strong trend. As you can see, there are also areas of consolidation which get broken out of and confirmed for the larger moves.
Author's Note: In each of these examples, I have outlined the start and end of each session. These examples come from 1 Min Future charts, and have specifically been framed with day trading in mind.
"Breakout Retest" or "Support/Resistance Flips" or "Structure Retests" are all generally the same thing, with different traders referring to them by different names, all of which can be seen throughout these examples.
In the next example, we have a day which started with an early reversal leading into long, slow, trend. Notice how each area throughout the trend essentially moves slightly higher, then consolidates while holding support of the previous zone. This day had a few sharp movements, however there was a large amount of neutrality throughout this day with continuous higher lows.
In contrast to the previous example, next up, we have a very choppy day. Throughout which we see a significant amount of retests before fast directional movements. We also see a few examples of places where previous zones remained relevant into the future. While the zones only display into the resulting trend area, they do not become immediately meaningless once they stop drawing.
> Abstract
In the screenshot below, I have stacked 2 of these indicators, using the high as the source for one and the low as the source for the other. I've hidden lines of the high and low channels to create a 4 lined channel based on the wicks of price.
This is not necessary to use the indicator, but should help provide an idea of creative ways the simple indicator could be used to produce more complicated analysis.
If you've made it this far, I would hope it's clear to you how this indicator could provide value to your trading.
Thank you to DonovonWall for the inspiration.
Enjoy! Indicator
Curved Trend Channels (Zeiierman)█ Overview
Curved Trend Channels (Zeiierman) is a next-generation trend visualization tool engineered to adapt dynamically to both linear and non-linear market behavior. It introduces a novel curvature-based channeling system that grows over time during trending conditions, mirroring the natural acceleration of price trends, while simultaneously leveraging adaptive range filtering and dual-layer candle trend logic.
This tool is ideal for traders seeking smooth yet reactive dynamic channels that evolve with market structure. Whether used in curved mode or traditional slope mode, it provides exceptional clarity on trend transitions, volatility compression, and breakout development.
█ How It Works
⚪ Adaptive Range Filter Foundation
The core of the system is a volatility-based range filter that determines the underlying structure of the bands:
Pre-Smoothing of High/Low Data – Highs and lows are smoothed using a selectable moving average (SMA, EMA, HMA, KAMA, etc.) before calculating the volatility range.
Volatility Envelope – The range is scaled using a fixed factor (2.618) and further adjusted by a Band Multiplier to form the primary envelope around price.
Smoothed Volatility Curve – Final bands are stabilized using a long lookback, ensuring clean visual structure and trend clarity.
⚪ Curved Channel Logic
In Curved Mode, the trend channel grows over time when the trend direction remains unchanged:
Base Step Size (× ATR) – Sets the minimum unit of slope change.
Growth per Bar (× ATR) – Defines the acceleration rate of the channel slope with time.
Trend Persistence Recognition – The longer a trend persists, the more pronounced the slope becomes, mimicking real market accelerations.
This dynamic, time-dependent logic enables the channel to "curve" upward or downward, tracking long-standing trends with increasing confidence.
⚪ Trend Slope
As an alternative to curved logic, traders can activate a regular Trend slope using:
Slope Length – Determines how quickly the trend line adapts to price shifts.
Multiplicative Factor – Amplifies the sensitivity of the slope, useful in fast-moving markets or lower timeframes.
⚪ Candle Trend Confirmation
A robust second-layer trend detection method, the Candle Trend System evaluates directional pressure by analyzing smoothed price action:
Multi-tier Smoothing – Trend lines are derived from short-, medium-, and long-term candle movement.
█ How to Use
⚪ Trend Identification
When the Trend Line direction and Candle Colors are in agreement, this indicates strong, persistent directional conviction. Use these moments to enter with trend confirmation and manage risk more confidently.
⚪ Retest
During ongoing trends, the price will often pull back into the dynamic channel. Look for:
Support/resistance interactions at the upper or lower bands.
█ Settings
Scaled Volatility Length – Controls the historical depth used to stabilize the volatility bands.
Smoothing Type – Choose from HMA, KAMA, VIDYA, FRAMA, Super Smoother, etc. to match your asset and trading style.
Volatility MA Length – Smoothing length for the calculated range; shorter = more reactive.
High/Low Smoother Length – Additional smoothing to reduce noise from spikes or false pivots.
Band Multiplier – Widens or tightens the band range based on personal preference.
Enable Curved Channel – Toggle between curved or regular trend slope behavior.
Base Step (× ATR) – The starting point for curved slope progression.
Growth per Bar (× ATR) – How much the slope accelerates per bar during a sustained trend.
Slope – Reactivity of the standard trend line to price movements.
Multiplicative Factor – Sensitivity adjustment for HyperTrend slope.
Candle Trend Length – Lookback period for trend determination from candle structure.
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Disclaimer
The content provided in my scripts, indicators, ideas, algorithms, and systems is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or a solicitation to buy or sell any financial instruments. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
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Dynamic Range Filter with Trend Candlesticks (Zeiierman)█ Overview
Dynamic Range Filter with Trend Candlesticks (Zeiierman) is a volatility-responsive trend engine that adapts in real-time to market structure, offering a clean and intelligent visualization of directional bias. It blends dynamic range calculation with customizable smoothing techniques and layered trend confirmation logic, making it ideal for traders who rely on clear trend direction, structural range analysis, and momentum-based candlestick signals.
By measuring scaled volatility over configurable lengths and applying advanced moving average techniques, this indicator filters out market noise while preserving true directional intent. Complementing this, a dual-trend system (range-based and candle-based) enhances clarity and responsiveness, particularly during shifting market conditions.
█ How It Works
⚪ Scaled Volatility Band Calculation
At the core lies a volatility engine that constructs adaptive range bands around price using smoothed high/low calculations. The bands are dynamically adjusted using:
High/Low Smoothing – Applies a moving average to the raw high and low data before calculating the range.
Scaled Range Volatility – A 2.618 multiplier scales the distance between smoothed highs and lows, forming a responsive volatility envelope.
Band Multiplier – Controls how wide the upper/lower range bands extend from the mean.
This filtering process minimizes false signals and highlights only structurally meaningful moves.
⚪ Multi-Type Smoothing Engine
Users can choose from a wide array of smoothing algorithms for trend construction, including:
HMA (default), SMA, EMA, RMA
KAMA – Adapts to market volatility using efficiency ratios.
VIDYA – Momentum-sensitive smoothing using CMO logic.
FRAMA – Dynamically adjusts to fractal dimension in price.
Super Smoother – Ideal for eliminating aliasing in range signals.
This provides the trader with fine-tuned control over reactivity vs. smoothness.
⚪ Trend Detection (Dual Engine)
The indicator includes two independent trend tracking systems:
Main Trend Filter – Based on adaptive volatility band shifts.
Candle Trend Filter – A second-tier confirmation using smoothed candle data, ideal for directional candles and confirmation entries.
█ How to Use
⚪ Trend Confirmation
Use the Trend Line and colored candlesticks for high-probability entries in the trend direction. The more trend layers that align, the higher the confidence.
⚪ Reversal Zones
When the price reaches the outer bands or fails to break them, look for candle color shifts or a crossover in the range to anticipate possible reversals or consolidations.
█ Settings
Scaled Volatility Length – Controls the lookback used to stabilize the base volatility band.
MA Type & Length – Choose and fine-tune the smoothing method (HMA, EMA, KAMA, etc.)
High/Low Smoother – Pre-smoothing for structural high/low banding.
Band Multiplier – Adjusts the width of the dynamic bands.
Trend Length (Candles) – Length used for candle-based trend confirmation.
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Disclaimer
The content provided in my scripts, indicators, ideas, algorithms, and systems is for educational and informational purposes only. It does not constitute financial advice, investment recommendations, or a solicitation to buy or sell any financial instruments. I will not accept liability for any loss or damage, including without limitation any loss of profit, which may arise directly or indirectly from the use of or reliance on such information.
All investments involve risk, and the past performance of a security, industry, sector, market, financial product, trading strategy, backtest, or individual's trading does not guarantee future results or returns. Investors are fully responsible for any investment decisions they make. Such decisions should be based solely on an evaluation of their financial circumstances, investment objectives, risk tolerance, and liquidity needs.
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Range Filtered Trend Signals [AlgoAlpha]Introducing the Range Filtered Trend Signals , a cutting-edge trading indicator designed to detect market trends and ranging conditions with high accuracy. This indicator leverages a combination of Kalman filtering and Supertrend analysis to smooth out price fluctuations while maintaining responsiveness to trend shifts. By incorporating volatility-based range filtering, it ensures traders can differentiate between trending and ranging conditions effectively, reducing false signals and enhancing trade decision-making.
:key: Key Features
:white_check_mark: Kalman Filter Smoothing – Minimizes market noise while preserving trend clarity.
:bar_chart: Supertrend Integration – A dynamic trend-following mechanism for spotting reversals.
:fire: Volatility-Based Range Detection – Detects trending vs. ranging conditions with precision.
:art: Color-Coded Trend Signals – Instantly recognize bullish, bearish, and ranging market states.
:gear: Customizable Inputs – Fine-tune Kalman parameters, Supertrend settings, and color themes to match your strategy.
:bell: Alerts for Trend Shifts – Get real-time notifications when market conditions change!
:tools: How to Use
Add the Indicator – Click the star icon to add it to your PulseWire favorites.
Analyze Market Conditions – Observe the color-coded signals and range boundaries to identify trend strength and direction.
Use Alerts for Trade Execution – Set alerts for trend shifts and market conditions to stay ahead without constantly monitoring charts.
:mag: How It Works
The Kalman filter smooths price fluctuations by dynamically adjusting its weighting based on market volatility. It helps remove noise while keeping the signal reactive to trend changes. The Supertrend calculation is then applied to the filtered price data, providing a robust trend-following mechanism. To enhance signal accuracy, a volatility-weighted range filter is incorporated, creating upper and lower boundaries that define trend conditions. When price breaks out of these boundaries, the indicator confirms trend continuation, while signals within the range indicate market consolidation. Traders can leverage this tool to enhance trade timing, filter false breakouts, and identify optimal entry/exit zones. Indicator
Powertrend - Volume Range Filter Strategy [wbburgin]The Powertrend is a range filter that is based off of volume, instead of price. This helps the range filter capture trends more accurately than a price-based range filter, because the range filter will update itself from changes in volume instead of changes in price. In certain scenarios this means that the Powertrend will be more profitable than a normal range filter.
Essentials of the Strategy
This is a breakout strategy which works best on trending assets with high volume and liquidity. It should be used on middle to higher timeframes and can be used on all assets that have volume provided by the data source (stocks, crypto, forex). It is long-only as of now. It can work on lower timeframes if you optimize the strategy filters to make less trades or if your exchange/broker is low/no fees, provided that your exchange/broker has high liquidity and volume.
The strategy enters a long position if the range filter is trending upwards and the price crosses over the upper range band, which signifies a price-volume breakout. The strategy closes the long position if the range filter is trending downwards and the price crosses under the lower range band, which signifies a breakdown. Both these conditions can be altered by the three filter options in the settings. The default trend filter is not alterable because it helps prevent false entries and exits that are against the trend.
Settings
The Length setting is the lookback period for the range smoothing.
The ADX Filter setting enables you to turn on an ADX filter, which will halt entries and exits unless the ADX of your customizable length is above a ADX VWMA of that length.
The Range Supertrend setting creates a supertrend from the top and bottom ranges, which can be used to filter entries and exits. The length is customizable. The filter can show you whether the range is making higher highs and lower lows. Below is an example of the Range Supertrend being used as a filter and plotted on-chart:
The VWMA setting halts entries if they are below a customizable length VWMA.
Both the Range Supertrend and the VWMA can also be plotted separately without actually filtering the strategy, so that you can use them independently if you wish. You can turn off the bar color, the highlighting, and the labels if you wish in the settings. A note about the bar color: if the color changes but the strategy does not signal an exit or entry this means that the crossover was against the trend. In these circumstances it may be indicative of a pullback to enter or exit or to add onto your position.
About the Strategy Results Below
A range filter is normally composed of two components - the range filter itself and a smoothing function. In the development of this script I tested both normal and volume-based varieties of the range filter and the smoothing function:
Tests Performed
Volume-based Range x VWMA smoothing
Price-based Range x VWMA smoothing
Price-based Range x EMA smoothing
Volume-based Range x EMA smoothing (final result)
The highest-performing was a volume-based range filter and a normal EMA-based smoothing function, but that does not mean that this strategy will be profitable - exits are based off of signal reversion so I strongly encourage you to develop your own take profits/stop losses for the strategy if you think it may be a good fit for you. The results below are with a commission value of 0.05% (because I built the strategy first for equities), slippage of 3, so if your exchange/broker has a higher fee schedule, I recommend adding filters and/or moving to higher timeframes for the strategy. Additionally, I used 10% of equity in each trade, while using the Range Supertrend filter (the previous upload was unrealistic because it used 100% of equity - missed a 0, apologies, and added in slippage). Strategy
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Volume OximeterOVERVIEW
The Volume Oximeter (VOXI) is a technical indicator that gauges the amount of volume currently present in the market, relative to the historical volume that was present before. The purpose of this indicator is to filter out with-trend signals during ranging/non-trending conditions.
CONCEPTS
This indicator assumes that trends are more likely to start during periods of high volume, compared to during periods of low volume. This is because high volume indicates that there are bigger players currently in the market, which is necessary to begin a sustained trending move.
So, to determine whether the current volume is "high", it is compared to an average volume for however number of candles back the user specifies.
If the current volume is greater than the average volume, it is reasonable to assume we are in a high volume period. Thus, this is the ideal time to enter a trending trade due to the assumption that trends are more likely to start during these high volume periods.
The default values in the indicator are designed for use on the daily chart but can be applied to any timeframe.
The default volume lookback period is 259 since there are usually 259 daily candles in a year on Forex daily charts. This means that the average volume will represent the average volume over the past year. This would be 365 on Crypto daily charts, since the Crypto is open 24/7 instead of 24/5). This is what the current volume will be compared to.
The default smoothing lookback period is 10, but this can be adjusted depending on the indicator that's giving you your with-trend signals. After my backtesting, 10 was the best value for my with-trend indicator, so you should do your own testing to see which value works best with your with-trend indicator.
HOW DO I READ THIS INDICATOR?
If the VOXI line is above or equal to zero (indicated by the blue color), the current volume is greater than the historical average volume.
This is a good time to take with-trend signals since high volume is necessary for sustained trending moves to begin.
If the VOXI line is below zero (indicated by the red color), the current volume is less than the historical average volume.
This is a good time to ignore with-trend signals since an absence of volume indicates that there aren't big market participants to participate in a new trending move. Indicator
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