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.
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.
- 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