LazyBear

Indicator: Relative Volume Indicator & Freedom Of Movement

Relative Volume Indicator
------------------------------
RVI is a support-resistance technical indicator developed by Melvin E. Dickover. Unlike many conventional support and resistance indicators, the Relative Volume Indicator takes into account price-volume behavior in order to detect the supply and demand pools. These pools are marked by "Defended Price Lines" (DPLs), also introduced by the author.

RVI is usually plotted as a histogram; its bars are highlighted (black, by default) when the volume is unusually large. According to the author, this happens if the indicator value exceeds 2.0, thus signifying that a possible DPL is present.

DPLs are horizontal lines that run across the chart at levels defined by following conditions:

* Overlapping bars: If the indicator spike (i.e., indicator is above 2.0 or a custom value)
corresponds to a price bar overlapping the previous one, the previous close can be used as the
DPL value.

* Very large bars: If the indicator spike corresponds to a price bar of a large size, use its
close price as the DPL value.

* Gapping bars: If the indicator spike corresponds to a price bar gapping from the previous bar,
the DPL value will depend on the gap size. Small gaps can be ignored: the author suggests using
the previous close as the DPL value. When the gap is big, the close of the latter bar is used
instead.

* Clustering spikes: If the indicator spikes come in clusters, use the extreme close or open
price of the bar corresponding to the last or next to last spike in cluster.

DPLs can be used as support and resistance levels. In order confirm and refine them, RVI is used along with the FreedomOfMovement indicator discussed next.

Freedom of Movement Indicator
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FOM is a support-resistance technical indicator, also by Melvin E. Dickover. FOM is the ratio of relative effect (relative price change) to the relative effort (normalized volume ), expressed in standard deviations. This value is plotted as a histogram; its bars are highlighted (black, by default( when this ratio is unusually high. These highlighted bars, or "spikes", define the positioning of the DPLs.

Suggestions for placing DPLs are the same as for the Relative Volume Indicator discussed above.

Note that clustering spikes provide the strongest DPLs while isolated spikes can be used to confirm and refine those provided by the Relative Volume Indicator. Coincidence of spikes of the two indicator can be considered a sign of greater strength of the DPL.

More info:
S&C magazine, April             2014.

I am still trying these on various instruments to understand the workings more. Don't forget to share what you learn -- any use cases / ideal scenarios / gotchas, would love to hear them all.
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//
// @author LazyBear
//
// If you use this code in its orignal/modified form, do drop me a note. 
// 
study("Relative Volume Indicator [LazyBear]", shorttitle="RVI_LB")
x= input(60, "Standard deviation length")
y= input(2, "Number of deviations")
allowNegativePlots=input(false, type=bool)
matchVolumeColor=input(false, type=bool)

av= sma(volume, x)
sd= stdev(volume, x)
relVol= iff(sd!=0, (volume-av)/sd, 0)
relV = allowNegativePlots == false ? max(relVol, 0) : relVol
b_color=matchVolumeColor ? (close>open ? green : red) : black

plot(relV, style=histogram, color=relV > y ? b_color : gray, linewidth=4)

Hi lazybear ,

Th fom indicator is not available anymore , can pls post the code here .(already tried the import function not working here )

Thanks
Reply
Hi Lazy Bear, thanks for this. Where is the Freedom of Movement (FOM) indicator? I can't seem to find it.
I'm using the Relative Volume Inidcator and would like to put it together with FOM. Thanks.
Reply
LB - Thanks gain for your work here. Great job. Have you developed: 1) rules for drawing your lines for the defended levels, b) have you developed a way to automate the plotting of the level in the form of a script based on your rules? I the absence of these, it is challenging to be consistent and give a good evaluation of this approach. It looks great on several charts I have seen but it really lacks the specificity to test on a larger sample.
Reply
LazyBear PRO Alphaoptions
Yes, I do have an auto S/R drawing indicator based on this...I havent implemented all the rules defined by the indicator author yet, but this is what I have so far (btw, this is 9 months old code -- so idk even remember what plans I had for this :) )

snapshot
Reply
Here's another view. As you see, this misses code to support gaps, large bars and, most importantly, clusters (as defined by the author).

snapshot
Reply
Hi LazyBear, can you share the code for Freedom of Movement as well? Thanks.
Reply
Code is there in the chart.

Click on "Share" icon (2nd on the left). This opens up a dialog box. Click on "Make it mine". Now, TV makes you a copy of this chart. It has the source code for both the indicators. You can save them to your private library.
Reply
law.neo LazyBear
Thank you for the quick reply, I got the code. Cheers.
Reply
Beautiful job! Thank you!
+1 Reply
LazyBear PRO Alphaoptions
yw :)
+1 Reply
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