Grading Buyer and Seller Volume Against Hull Moving Average Trends
Summary
The Faith Indicator estimates whether buying or selling pressure is prevailing by comparing volume on directional price bars. It counts a bar toward buyer demand when price makes a higher high alongside greater volume, and toward seller supply when price makes a lower low alongside greater volume. Each side is normalized against the highest volume in a recent window, averaged over a configurable period, and the difference is mapped to a stepped positive or negative grade shown as a histogram.
A separate backdrop grades trend using the slopes of fast and slow Hull moving averages, with an ATR based threshold distinguishing directional movement from flat conditions. The author suggests looking for agreement between the volume grade and price trend, while treating disagreement as a possible contrarian clue or sign of weakening movement. These are interpretive heuristics, not validated trading results. The indicator requires published volume, and its volume and trend thresholds are fixed or configurable heuristics rather than calibrated probabilities.
Key ideas
- Higher highs with expanding volume contribute to the buyer demand series, while lower lows with expanding volume contribute to seller supply.
- The difference between smoothed buyer and seller measures becomes a discrete positive, neutral, or negative histogram grade.
- Fast and slow Hull moving average slopes provide a separate trend backdrop, with an ATR scaled threshold for trend classification.
- Agreement between the histogram and trend backdrop may be read as confirmation, while disagreement may flag a potential divergence.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.