Estimating Candle-Based Buying and Selling Volume Imbalance

Summary

This document explains a histogram indicator that estimates the difference between upward and downward volume using OHLCV bars. It allocates each bar’s reported volume between two components according to price movement within the candle, then plots the difference as a histogram. Positive and negative values therefore represent the indicator’s estimated directional volume balance.

The calculation uses the distance from the open to the high for the upward component and the distance from the close to the low for the downward component. The document says the indicator has no configurable parameters because it derives its values from bar data. It provides the formula but no validation against actual buyer-initiated or seller-initiated trades, performance tests, or guidance for using the histogram in a strategy. The estimate should therefore be understood as a candle-based proxy, not a direct measure of traded order flow.

Key ideas

• The indicator plots the difference between estimated upward and downward volume.
• It allocates bar volume using candle price ranges relative to the open, high, close, and low.
• Its calculation is based on OHLCV data and has no configurable parameters.
• The document does not establish that the estimate matches trade-level order flow.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.