Description: The Volume Shaded Candles indicator (VSC) is a technical analysis tool designed to represent price candles on a chart with transparency based on the volume traded during each candle. This overlay indicator enhances visual analysis by providing a visual representation of volume intensity.
How it Works: The VSC indicator calculates the volume-to-transparency ratio by dividing the current volume by the highest volume within the last 10 periods. The ratio is then used to determine the shading intensity of the price candles. Higher volume relative to the recent highest volume results in lower transparency, while lower volume results in higher transparency.
Usage: To effectively utilize the Volume Shaded Candles indicator, follow these steps:
1. Apply the Volume Shaded Candles indicator to your chart by adding it from the available indicators. 2. Configure the indicator's inputs: - Specify the color for bullish candles using the "Bullish Color" input. - Specify the color for bearish candles using the "Bearish Color" input. 3. Observe the shaded candles on the chart: - Bullish candles are colored with the specified bullish color and shaded according to the volume intensity. - Bearish candles are colored with the specified bearish color and shaded according to the volume intensity. 4. Interpret the shaded candles: - Darker shading indicates higher volume during the corresponding candle. - Lighter shading indicates lower volume during the corresponding candle. 5. Combine the analysis of shaded candles with other technical analysis tools, such as trend lines, support and resistance levels, or candlestick patterns, to identify potential trade setups. 6. Implement appropriate risk management strategies, including setting stop-loss orders and position sizing, to manage your trades effectively and protect your capital.
Release Notes
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The ratio applied to the transparency calculation has been updated to retrieve more data giving a smother gradient effect between bars.
Release Notes
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Calculation to shading increments updated to provide more detail and variance in shading.
Release Notes
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The Volume indicator has been added to the Volume Shaded Candles chart image to allow users a visual representation of how the indicator functions without it needing to be applied.
Love it bro ,However i noticed in a bearish market despite volume being high , the transparency remains high.In a Bullish market i see the color getting darker as expected .
maybethatguy
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@Mtmind, Thank you, The code used the highest volume from the last 21 candles to make its calculations. If there is almost no volume for the previous 20 or so candles, even if the next candle has just a little more volume than the previous candles, it will shade in darker. It works best after the market has been moving for a little.
Mtmind
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@maybethatguy It works best after the market has been moving for a little.-I noticed this.
I wish i could share the screenshot of what i am saying .
Mtmind
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9.55 candle ,Can you please explain why is it not dark red ?
maybethatguy
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@Mtmind, The candles before it have higher volume. It is shaded as a percentage of the highest volume from the last 21 candles. It's shaded lighter because the candles before it have more volume. The transparency is calculated as the percentage. Volume was decreasing, so your candles got lighter. I use this indicator all the time and love it. If you look closely, it is a darker red than the red candle before it.
Mtmind
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@maybethatguy, Right , I noticed it now , its slightly darker .So what i am noticing in general is , When its about to turn around ,the candles start to get darker for both green and red and also when its in indecision phase it turn dark green and red. so this helps me prepare for divergence and also when not to trade .
Do you use it in similar way ?
maybethatguy
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@Mtmind, Yes, I look at high volume candles as possible reversals. Combined with support and resistance areas, it works very well. I've noticed that high volume bullish candles can mean price could drop, while a high volume bearish candle could mean that price will rise. I like being able to look at the candles directly and be able to make a determination from that. Rather then look at the volume indicator and piece it together that way. These aren't the best examples, but they work:
Mtmind
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@maybethatguy, Thanks for the screen shot ,I was using green for bullish and red for bearish , this looks WAY better ! Even i was trying to piece it together while reading volume so was extensively searching for ANYTHING that could prevent me from watching volume nonstop as you may know it gets exhausting !Thanks Again .
maybethatguy
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@Mtmind, Volume is important, it's nice when you don't have to look anywhere for it. Good luck out there