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