The Normalized Volume Oscillator is a powerful tool designed to help traders analyze market trends more effectively. This innovative indicator utilizes normalized volume data, which you can learn more about here.
So, what’s the deal with normalized values? Well, they’re expressed as a percentage of the average volume over a specific period. This nifty feature allows the data displayed on your chart to dip into negative territory, indicating a potential lull in market activity.
Another cool addition is the coloring of histogram bars based on the size of the normalized volume. Here’s the breakdown:
- Blue: Current volume is below the average for this period.
- Dark Green: Volume slightly exceeds the average.
- Light Green: Volume increase surpasses the Fibonacci level of 38.2% compared to the average.
- Yellow: Volume exceeds the Fibonacci level of 61.8% compared to the average.
- White: (shown as red in the image below) indicates that volume has exceeded the Fibonacci level of 100% compared to the average.
Normalized Volume Oscillator
In the example above, you can see how the Normalized Volume Oscillator can be utilized to assess the likelihood of breaking through pivot levels. The yellow histogram bar suggests a strong potential for a breakout in the near future, while the white (red in the image) bar signals that a breakout is currently happening and is likely to succeed.
This indicator tends to shine on shorter timeframes, like the 15-minute chart. When analyzing longer trends, the conditions for breakouts can be a bit dulled since the overall volume level is higher. In such cases, a simple green histogram bar is enough to indicate potential movement.
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