What is Stopping Volume Pattern or stopping volume candle?
The above is ideal representation of stopping volume pattern. Succesive downward bars having decreasing size and increasing volume. It is result of panic selling by the market participants. A set of other investors known as professionals who have inside information and have large research team have fair idea of price. After a significant downfall in price, these professionals find price lucrative and they jumpin for the buying. The huge buying by the professionals is represented in the structure of bar and their size as explained above.
Stopping volume Indicator in Pinescript
|
//@version=4 study("Stopping volume",overlay=true) volAvg = sma(volume,40) closePos = (close - low)/(high-low) // if close = high then closePos = 1, if close = low, value is zero if volume > 1.5 * volAvg and closePos > .5 and close < sma(close,7) and low==lowest(low,5) label1 =label.new(x=bar_index,y=high[1],text="SV") |
Though the diagram in the previous section is of successive bars, the code is bit different for identification of stopping volume. You can attempt different code for identification of these bars based on your understanding of the pattern and pinescript skills. In the above code, average of 40 bars have been used for benchmarking of volume. If you like you may increase or decrease this number also.
Example of stopping volume Bar
Above is ICICI Daily Chart for the period March to May 2020. On the left are two stopping volume patterns found by pinescript indicator script. The volume spread analysis of stopping volume suggest that huge volume was absorbed by these two candles by the professionals and the close of the bar is closer to the high of the bar.
How to trade Stopping volume bar (VSA)?
The successful stopping volume bar happens to stop fall in prices and the lower point of the bar act as support because this is the price area wherein professionals have put-in their huge money for value buy. Now if price goes below this point they can lose their position. The professionals will always try to defend their position at this support line.
When price reaches to this support line a sharp reaction is expected. It is suggested to take a long position when price touches this support line. In the above example for ICICI Bank from NSE , an Indian exchange price touched this support line twice and reaction was observed.
Resources
Learn more on volume price analysis and other technical fundamentals through the Book "A Complete Course to Volume Price Analysis- Read the market Bar by Bar" by Achal. Pinescript codes for identification of bars also available in book to assist you during your learning.
200+ pages book 130 pages book
Learn more on volume price analysis and other technical fundamentals through the Book "A Complete Course to Volume Price Analysis- Read the market Bar by Bar" by Achal. Pinescript codes for identification of bars also available in book to assist you during your learning.
| |
| 200+ pages book | 130 pages book |
