Volume-by-Price

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technical_indicators:volume_by_price [2019/06/24 19:38]
127.0.0.1 external edit
technical_indicators:volume_by_price [2023/09/12 19:39] (current)
jayanthi [Using with SharpCharts]
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 ====== Volume-by-Price ====== ====== Volume-by-Price ======
  
-===== Introduction ​=====+===== What Is Volume-by-Price? ​=====
  
-Volume-by-Price is an indicator that shows the amount of volume for a particular price range, which is based on closing prices. Volume-by-Price bars are horizontal and shown on the left side of the chart to correspond with these price ranges. Chartists can view these bars as a single color or with two colors to separate up volume and down volume. By combining volume and closing prices, this indicator can be used to identify high-volume price ranges to mark support or resistance. StockCharts shows twelve Volume-by-Price bars by default, but users can increase or decrease this number to suit their preferences.+Volume-by-Price is an indicator that shows the amount of volume for a particular price range, which is based on closing prices. Volume-by-Price bars are horizontal and shown on the left side of the chart to correspond with these price ranges. Chartists can view these bars as a single color or with two colors to separate up volume and down volume. By combining volume and closing prices, this indicator can identify high-volume price ranges to mark support or resistance. StockCharts shows twelve Volume-by-Price bars by default, but users can increase or decrease this number to suit their preferences.
  
-===== Calculation ​=====+===== How Do You Calculate Volume-by-Price? ​=====
  
 Volume-by-Price calculations are based on the entire period displayed on the chart. On a five-month daily chart, Volume-by-Price would be based on **ALL** five months of daily closing data, while on a two-week 30-minute chart, it would be based on two weeks of 30-minute closing data, and on a three-year weekly chart, it would be based on three years of weekly closing data. You get the idea. Volume-by-Price calculations do not extend beyond the historical data shown on the chart. ​ Volume-by-Price calculations are based on the entire period displayed on the chart. On a five-month daily chart, Volume-by-Price would be based on **ALL** five months of daily closing data, while on a two-week 30-minute chart, it would be based on two weeks of 30-minute closing data, and on a three-year weekly chart, it would be based on three years of weekly closing data. You get the idea. Volume-by-Price calculations do not extend beyond the historical data shown on the chart. ​
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 The Volume-by-Price bars represent the total volume for each price zone. Volume can then be separated into positive and negative volume. Notice that the Volume-by-Price bars on the chart above are red and green to separate positive volume from negative volume. ​ The Volume-by-Price bars represent the total volume for each price zone. Volume can then be separated into positive and negative volume. Notice that the Volume-by-Price bars on the chart above are red and green to separate positive volume from negative volume. ​
  
-===== Interpretation ​=====+===== How Do You Interpret Volume-by-Price Bars? =====
  
-Volume-by-Price can be used to identify current ​[[:​chart_analysis:​support_and_resistance|support and resistance]] levels ​as well as estimate future support and resistance levels. Price zones with heavy volume reflect elevated interest levels that can influence future supply or demand (a.k.a. resistance or support). Long Volume-by-Price bars underneath prices should be watched as potential support during a pullback. Similarly, long Volume-by-Price bars above prices should be watched as potential resistance on a bounce. ​+Volume-by-Price can be used to identify current support and resistance levels ​and estimate future support and resistance levels. Price zones with heavy volume reflect elevated interest levels that can influence future supply or demand (a.k.a. resistance or support). Long Volume-by-Price bars underneath prices should be watched as potential support during a pullback. Similarly, long Volume-by-Price bars above prices should be watched as potential resistance on a bounce. ​
  
 Price breaks above or below long Volume-by-Price bars can also be used as signals. A break above a long bar shows strength because demand was strong enough to overcome a supply overhang. Similarly, a break below a long bar shows weakness because supply was ample enough to overwhelm demand.  ​ Price breaks above or below long Volume-by-Price bars can also be used as signals. A break above a long bar shows strength because demand was strong enough to overcome a supply overhang. Similarly, a break below a long bar shows weakness because supply was ample enough to overwhelm demand.  ​
  
 +**Learn More:** [[:​chart_analysis:​support_and_resistance|Support and Resistance]]
 ===== Nuances ===== ===== Nuances =====
  
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 {{:​technical_indicators:​volume_by_price:​vbyp-5-bdxgaps.png|VBYP - Gaps}} {{:​technical_indicators:​volume_by_price:​vbyp-5-bdxgaps.png|VBYP - Gaps}}
  
-===== Identifying ​Support =====+===== How Do You Identify ​Support ​Using Volume-by-Price? ​=====
  
-The chart for Netflix (NFLX) shows Volume-by-Price identifying support around 95-100 at the end of June. Notice that this is the longest bar. Also, notice that NFLX is beginning a pullback so we can use Volume-by-Price to estimate support in the near future. The second chart shows NFLX with the yellow area marking Volume-by-Price support from the first chart. Support was expected in the 95-100 area and the stock reversed here in late July. Notice that volume surged in August to validate the reversal off of support. ​+The chart for Netflix (NFLX) shows Volume-by-Price identifying support around 95-100 at the end of June. Notice that this is the longest bar. Also, notice that NFLX is beginning a pullbackso we can use Volume-by-Price to estimate support in the near future. The second chart shows NFLX with the yellow area marking Volume-by-Price support from the first chart. Support was expected in the 95100 areaand the stock reversed here in late July. Notice that volume surged in August to validate the reversal off of support. ​
  
 {{:​technical_indicators:​volume_by_price:​vbyp-6-nflxsupp1.png|VBYP - NFLX}} {{:​technical_indicators:​volume_by_price:​vbyp-6-nflxsupp1.png|VBYP - NFLX}}
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 {{:​technical_indicators:​volume_by_price:​vbyp-7-nflxsupp2.png|VBYP - NFLX}} {{:​technical_indicators:​volume_by_price:​vbyp-7-nflxsupp2.png|VBYP - NFLX}}
  
-===== Identifying ​Resistance =====+===== How Do You Identify ​Resistance ​Using Volume-by-Price? ​=====
  
-The chart for TE Connectivity (TEL) shows Volume-by-Price identifying resistance around 26-26.5 in early August. Remember, the April break above this bar is not really ​a breakout because the current Volume-by-Price calculation extends from January to early August. The second longest bar marks current resistance in the 26-26.5 area. TEL is at its make-or-break point with prices near resistance. The second chart shows Volume-by-Price resistance from the first and the ultimate failure at resistance. ​+The chart for TE Connectivity (TEL) shows Volume-by-Price identifying resistance around 26-26.5 in early August. Remember, the April break above this bar is not a breakout because the current Volume-by-Price calculation extends from January to early August. The second longest bar marks current resistance in the 26-26.5 area. TEL is at its make-or-break pointwith prices near resistance. The second chart shows Volume-by-Price resistance from the first and the ultimate failure at resistance. ​
  
 {{:​technical_indicators:​volume_by_price:​vbyp-9-telresis2.png|VBYP - TEL}} {{:​technical_indicators:​volume_by_price:​vbyp-9-telresis2.png|VBYP - TEL}}
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 A break above a long Volume-by-Price bar signals an increase in demand that can foreshadow higher prices. Long bars above prices mark supply overhangs that demand has not been able to overcome. A break above this resistance zone signals strengthening demand and higher prices are expected. ​ A break above a long Volume-by-Price bar signals an increase in demand that can foreshadow higher prices. Long bars above prices mark supply overhangs that demand has not been able to overcome. A break above this resistance zone signals strengthening demand and higher prices are expected. ​
  
-Sometimes chartists need to combine price action and Volume-by-Price to identify support zones and resistance zones. The McDonalds (MCD) chart shows a long bar marking overhead supply between 60 and 61. The stock also met resistance between 61 and 62 with reaction highs in late April and mid-June. For support, the second and third longest bars mark potential demand in the 57.5-58.5 area and the stock is near the late May low. Overall, a large [[:chart_analysis:​chart_patterns:​symmetrical_triangle_continuation|Symmetrical Triangle]] could be forming on the price chart as MCD tries to hold above the late May low. The second chart shows MCD breaking resistance in July and surging to new highs in August. ​+Sometimes chartists need to combine price action and Volume-by-Price to identify support zones and resistance zones. The McDonalds (MCD) chart shows a long bar marking overhead supply between 60 and 61. The stock also met resistance between 61 and 62 with reaction highs in late April and mid-June. For support, the second and third longest bars mark potential demand in the 57.5-58.5 area and the stock is near the late May low. Overall, a large [[:glossary_s#​symmetrical_triangle|Symmetrical Triangle]] could be forming on the price chart as MCD tries to hold above the late May low. The second chart shows MCD breaking resistance in July and surging to new highs in August. ​
   
 {{:​technical_indicators:​volume_by_price:​vbyp-13-mcdresis2.png|VBYP - MCD}} {{:​technical_indicators:​volume_by_price:​vbyp-13-mcdresis2.png|VBYP - MCD}}
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 {{:​technical_indicators:​volume_by_price:​vbyp-13a-mcdbreak.png|VBYP - MCD}} {{:​technical_indicators:​volume_by_price:​vbyp-13a-mcdbreak.png|VBYP - MCD}}
  
-===== Conclusion ​=====+===== The Bottom Line =====
  
-Volume-by-Price is best suited for identifying present or future support and resistance. The indicator marks potential support when prices are above a long bar and potential resistance when prices are below a long bar. Chartists can enhance their analysis by looking at the positive (green) and negative (red) volume within the Volume-by-Price bars. Long green portions reflect more demand that can further validate support. Long red portions reflect more supply that can further validate resistance. It is important to confirm Volume-by-Price findings with other indicators and analysis techniques. ​[[:​technical_indicators:​introduction_to_technical_indicators_and_oscillators#​momentum_oscillators|Momentum oscillators]] and [[:​chart_analysis:​chart_patterns|chart patterns]] are good complements to this volume based indicator. ​+Volume-by-Price is best suited for identifying present or future support and resistance. The indicator marks potential support when prices are above a long bar and potential resistance when prices are below a long bar. Chartists can enhance their analysis by looking at the positive (green) and negative (red) volume within the Volume-by-Price bars. Long green portions reflect more demand that can further validate support. Long red portions reflect more supply that can further validate resistance. It is important to confirm Volume-by-Price findings with other indicators and analysis techniques. Momentum oscillators and chart patterns are good complements to this volume-based indicator. ​
  
 +**Learn More:** [[:​technical_indicators:​introduction_to_technical_indicators_and_oscillators#​momentum_oscillators|Momentum Oscillators]] | [[:​chart_analysis:​chart_patterns|Chart Patterns]]
 ===== Using with SharpCharts ===== ===== Using with SharpCharts =====
  
-Volume-by-Price can be found in SharpCharts in the "​overlays"​ section. Initially the parameter box is empty and the default value of 12 periods is used. Chartists can increase or decrease the default setting depending on the amount of detail ​desiredKeep in mind that Volume-by-Price is based on closing prices, which means highs and lows are not included. This is why chartists may sometimes see a spike low or high without a Volume-by-Price bar. Volume-by-Price is one color when the "color volume"​ box is not checked and two-toned when this box is checked. Chartists can also use the advanced indicator settings to set the opacity. The example below shows Apple with 20-bar Volume-by-Price,​ colored volume, and 0.3 opacity. [[https://​stockcharts.com/​h-sc/​ui?​s=AAPL&​p=D&​yr=0&​mn=6&​dy=0&​id=p03412996346&​listNum=30&​a=209159944|Click here]] for a live example. ​+Volume-by-Price can be found in SharpCharts in the "​overlays"​ section. Initiallythe parameter box is emptyand the default value of 12 periods is used. Chartists can increase or decrease the default setting depending on the desired ​detail. ​Remember ​that Volume-by-Price is based on closing prices, which means highs and lows are omitted. This is why chartists may sometimes see a spike low or high without a Volume-by-Price bar. Volume-by-Price is one color when the "color volume"​ box is not checked and two-toned when this box is checked. Chartists can also use the advanced indicator settings to set the opacity. The example below shows Apple with 20-bar Volume-by-Price,​ colored volume, and 0.3 opacity. [[https://​stockcharts.com/​h-sc/​ui?​s=AAPL&​p=D&​yr=0&​mn=6&​dy=0&​id=p03412996346&​listNum=30&​a=209159944|Click here]] for a live example. ​
  
 {{:​technical_indicators:​volume_by_price:​vbyp-14-shchexam.png|VBYP - SharpCharts}} {{:​technical_indicators:​volume_by_price:​vbyp-14-shchexam.png|VBYP - SharpCharts}}
 +
 +For more details on the parameters used to configure Volume-by-Price overlays, please see our [[https://​support.stockcharts.com/​doku.php?​id=sharpcharts:​reference#​volume_by_price|SharpCharts Parameter Reference]] in the Support Center. ​
 +
 +===== Volume-by-Price FAQs =====
 +==== What does it mean when there'​s a gap in the Volume-by-Price bars? ====
 +Gaps can produce bars that equal zero. This occurs because the Volume-by-Price equals zero when there are no closing prices within a specific price zone.
 +
 +==== How does Volume-by-Price help in understanding potential price movements? ====
 +Long Volume-by-Price bars beneath prices can indicate potential support during a price drop, while long bars above prices might indicate potential resistance during a price increase.
 +
 +==== Are there nuances to be aware of when interpreting the Volume-by-Price indicator? ====
 +Yes. It's crucial to understand that the indicator is based on all the price-volume data shown on the chart. Therefore, it may not validate past support or resistance levels. Also, chartists should be aware that large gaps can produce zero bars.
 +
 +==== How can chartists enhance their analysis using Volume-by-Price?​ ====
 +Chartists can look at the positive (green) and negative (red) volume within the Volume-by-Price bars. Furthermore,​ confirming Volume-by-Price findings with other indicators and analysis techniques, such as momentum oscillators and chart patterns, can provide a more holistic view.
 +
 +==== Can you adjust the number of Volume-by-Price bars shown on StockCharts?​ ====
 +Yes, StockCharts shows twelve Volume-by-Price bars by default, but users can increase or decrease this number based on their preferences.
 +
 +==== How can the Volume-by-Price be used for support and resistance? ====
 +Price zones with heavy volume indicate elevated interest levels that can influence future supply or demand, marking them as resistance or support. Breaks above or below long Volume-by-Price bars can also be seen as signals indicating strength or weakness.
 +