Volume Heatmaps Using Standard Deviation from Average Volume
Summary
This indicator classifies each volume bar by how far volume sits above or below its moving average, measured in standard deviations. Separate lookbacks control the average and dispersion estimates, while configurable multipliers divide observations into low, normal, medium, high, and extra-high zones. The default settings use the same long lookback for both calculations, with thresholds ranging from a negative half standard deviation to four standard deviations above the mean.
The display can color volume bars by volume alone or combine volume intensity with candle direction, and it can show threshold zones as shaded backgrounds, lines, or both. Alerts identify volume classes and, for several higher classes, whether the bar closed up or down. The document describes the calculation and interface but provides no performance tests or evidence that unusual volume predicts returns. Results depend on lookback and threshold choices, and the code uses standard deviation as its scale for classifying volume.
Key ideas
- Volume intensity is measured as the difference between current volume and its moving average, divided by volume standard deviation.
- Separate lookback settings govern the moving average and standard deviation estimates.
- Threshold multipliers assign volume observations to five display classes.
- Color modes can emphasize volume alone or combine volume class with candle direction.
- Alerts flag selected volume classes, but the document gives no evidence of predictive performance.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.