Volume Exhaustion Strategy

Sharp spikes in volume often signal the end of a move as traders rush to exit or enter positions. This strategy measures current volume against an average to spot exhaustion. When combined with candle direction and a moving average filter it can pinpoint reversal entries.

Testing indicates an average annual return of about 133%. It performs best in the crypto market.

Each candle updates the average volume. If the new bar's volume exceeds this average by a set multiplier and the candle closes in the direction opposite the prevailing trend, the system enters a trade. A stop based on ATR protects the position.

The trade is typically exited via the stop-loss as the strategy anticipates a swift reversal following the volume burst.

Details

• Entry Criteria: Volume spike above average with candle opposite the trend.
• Long/Short: Both.
• Exit Criteria: Stop-loss.
• Stops: Yes, ATR based.
• Default Values:
  • VolumePeriod = 20
  • VolumeMultiplier = 2.0
  • MAPeriod = 20
  • AtrMultiplier = 2 ATR
  • CandleType = 5 minute
• Filters:
  • Category: Reversal
  • Direction: Both
  • Indicators: Volume, MA, ATR
  • Stops: Yes
  • Complexity: Intermediate
  • Timeframe: Intraday
  • Seasonality: No
  • Neural networks: No
  • Divergence: No
  • Risk level: Medium