Volume Momentum is calculated by finding the difference between the closing prices of two successive intervals, and applying that amount as a multiple to the second interval’s volume.
In this way both the direction (+ up or - down) of the price movement for the interval, and the magnitude (in terms of both overall price movement as well as volume of trade) of the movement can be plotted. An overall indicator of the interval's directional momentum will result.
The formula for calculating the Volume Momentum for a particular interval is as follows:
|
Formula: Close of Current Interval LESS Close of Previous Interval = (+/- number) then (+/- number)
x Current
Interval's Volume = Volume Momentum |
The resulting amount is plotted in its own indicator window below the price chart.
As the figure is either positive or negative, it oscillates above and below zero level on the y-axis.
This indicator can be effectively displayed as a line, histogram or step.
There are no user defined parameters for the Volume Momentum calculation itself, however users do have control over various aspects of the indicator's visual display.
The Style selected for the plot can be one of the following: Solid, Dashes, Dots, Points, Histogram or Step.
The plot can be set to be displayed inverted. When this setting is turned on, a small Inv icon will appear in the Volume Momentum's scale (Y-axis).
Once the style is selected the Color, Weighting and Visibility can also be controlled from this page.
The Scale's display is controlled from the Scale Settings and Scale Appearance tabbed pages.
Traders use Signals to consistently apply the indicator set to predefined parameters specifically designed to detect specific particular price movements or market conditions.
For the Volume Momentum indicator the following Volume Momentum have been devised and are the default settings for the Signals' chart display:
|
Signal Name |
Description |
VMM Positive |
Today's VM level at Close is higher than yesterday's VM level at Close. |
VMM Negative |
Today's VM level at Close is lower than yesterday's VM level at Close. |
When displayed with the indicator, users turn the display of the various signals to visible/invisible and change the display of the signal lines in the Signals tab of the Volume Momentum Properties dialog box:
For more information on displaying each signal's lines and bands go to the Displaying Signals help topic.
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