Bar Balance [LucF]

May 1, 2020

[I]Bar Balance extracts the number of up, down and neutral intrabars contained in each chart bar, revealing information on the strength of price movement. It can display stacked columns representing raw up/down/neutral intrabar counts, or an up/down balance line which can be calculated and visualized in many different ways.

WARNING: This is an analysis tool that works on historical bars only. It does not show any realtime information, and thus cannot be used to issue alerts or for automated trading. When realtime bars elapse, the indicator will require a browser refresh, a change to its Inputs or to the chart's timeframe/symbol to recalculate and display information on those elapsed bars. Once a trader understands this, the indicator can be used advantageously to make discretionary trading decisions.

Traders used to work with my Delta Volume Columns Pro will feel right at home in this indicator's Inputs. It has lots of options, allowing it to be used in many different ways. If you value the bar balance information this indicator mines, I hope you will find the time required to master the use of [I]Bar Balance well worth the investment.


█ OVERVIEW

The indicator has two modes: [I]Columns and [I]Line.

Columns
• In Columns mode you can display stacked Up/Down/Neutral columns.
• The "Up" section represents the count of intrabars where `close > open`, "Down" where `close < open` and "Neutral" where `close = open`.
• The Up section always appears above the centerline, the Down section below. The Neutral section overlaps the centerline, split halfway above and below it.
 The Up and Down sections start where the Neutral section ends, when there is one.
• The Up and Down sections can be colored independently using 7 different methods.
• The signal line plotted in Line mode can also be displayed in Columns mode.

Line
• Displays a single balance line using a zero centerline.
• A variable number of independent methods can be used to calculate the line (6), determine its color (5), and color the fill (5).
 You can thus evaluate the state of 3 different components with this single line.
• A "Divergence Levels" feature will use the line to automatically draw expanding levels on divergence events.

Features available in both modes
• The color of all components can be selected from 15 base colors, with 16 gradient levels used for each base color in the indicator's gradients.
• A zero line can show a 6-state aggregate value of the three main volume balance modes.
• The background can be colored using any of 5 different methods.
• Chart bars can be colored using 5 different methods.
• Divergence and large neutral count ratio events can be shown in either [I]Columns or [I]Line mode, calculated in one of 4 different methods.
• Markers on 6 different conditions can be displayed.


█ CONCEPTS

Intrabar inspection
Intrabar inspection means the indicator looks at lower timeframe bars (intrabars) making up a given chart bar to gather its information. If your chart is on a 1-hour timeframe and the intrabar resolution determined by the indicator is 5 minutes, then 12 intrabars will be analyzed for each chart bar and the count of up/down/neutral intrabars among those will be tallied.

Bar Balances and calculation methods
The indicator uses a variety of methods to evaluate bar balance and to derive other calculations from them:
1. [I]Balance on Bar: Uses the relative importance of instant Up and Down counts on the bar.
2. [I]Balance Averages: Uses the difference between the EMAs of Up and Down counts.
3. [I]Balance Momentum: Starts by calculating, separately for both Up and Down counts, the difference between the same EMAs used in Balance Averages and an SMA of double the period used for the EMAs. These differences are then aggregated and finally, a bounded momentum of that aggregate is calculated using RSI.
4. [I]Markers Bias: It sums the bull/bear occurrences of the four previous markers over a user-defined period (the default is 14).
5. [I]Combined Balances: This is the aggregate of the instant bull/bear bias of the three main bar balances.
6. [I]Dual Up/Down Averages: This is a display mode showing the EMA calculated for each of the Up and Down counts.

Interpretation of neutral intrabars
What do neutral intrabars mean? When price does not change during a bar, it can be because there is simply no interest in the market, or because of a perfect balance between buyers and sellers. The latter being more improbable, Bar Balance assumes that neutral bars reveal a lack of interest, which entails uncertainty. That is the reason why the option is provided to interpret ratios of neutral intrabars greater than 50% as divergences. It is also the rationale behind the option to dampen signal lines on the inverse ratio of neutral intrabars, so that zero intrabars do not affect the signal, and progressively larger proportions of neutral intrabars will reduce the signal's amplitude, as the balance calcs using the up/down counts lose significance. The impact of the dampening will vary with markets. Weaker markets such as cryptos will often contain greater numbers of neutral intrabars, so dampening the Line in that sector will have a greater impact than in more liquid markets.


█ FEATURES

1 — Columns
• While the size of the Up/Down columns always represents their respective importance on the bar, their coloring mode is independent. The default setup uses a standard coloring mode where the Up/Down columns over/under the zero line are always in the bull/bear color with a higher intensity for the winning side. Six other coloring modes allow you to pack more information in the columns. When choosing to color the top columns using a bull/bear gradient on Balance Averages, for example, you will end up with bull/bear colored tops. In order for the color of the bottom columns to continue to show the instant bar balance, you can then choose the "Up/Down Ratio on Bar — Dual Solid Colors" coloring mode to make those bars the color of the winning side for that bar.
• Line mode shows only the line, but Columns mode allows displaying the line along with it. If the scale of the line is different than that of the scale of the columns, the line will often appear flat. Traders may find even a flat line useful as its bull/bear colors will be easily distinguishable.

2 — Line
• The default setup for Line mode uses a calculation on "Balance Momentum", with a fill on the longer-term "Balance Averages" and a line color based on the "Markers Bias". With the background set on "Line vs Divergence Levels" and the zero line on the hard-coded "Combined Bar Balances", you have access to five distinct sources of information at a glance, to which you can add divergences, divergences levels and chart bar coloring. This provides powerful potential in displaying bar balance information.
• When no columns are displayed, Line mode can show the full scale of whichever line you choose to calculate because the columns' scale no longer interferes with the line's scale.
• Note that when "Balance on Bar" is selected, the Neutral count is also displayed as a ratio of the balance line. This is the only instance where the Neutral count is displayed in Line mode.
• The "Dual Up/Down Averages" is an exception as it displays two lines: one average for the Up counts and another for the Down counts. This mode will be most useful when Columns are also displayed, as it provides a reference for the top and bottom columns.

3 — Zero Line
The zero line can be colored using two methods, both based on the Combined Balances, i.e., the aggregate of the instant bull/bear bias of the three main bar balances.
• In "Six-state Dual Color Gradient" mode, a dot appears on every bar. Its color reflects the bull/bear state of the Combined Balances, and the dot's brightness reflects the tally of balance biases.
• In "Dual Solid Colors (All Bull/All Bear Only)" a dot only appears when all three balances are either bullish or bearish. The resulting pattern is identical to that of Marker 1.

4 — Divergences
• Divergences are displayed as a small circle at the top of the scale. Four different types of divergence events can be detected. Divergences occur whenever the bull/bear bias of the method used diverges with the bar's price direction.
• An option allows you to include in divergence events instances where the count of neutral intrabars exceeds 50% of the total intrabar count.
• The divergence levels are dynamic levels that automatically build from the line's values on divergence events. On consecutive divergences, the levels will expand, creating a channel. This implementation of the divergence levels corresponds to my view that divergences indicate anomalies, hesitations, points of uncertainty if you will. It excludes any association of a pre-determined bullish/bearish bias to divergences. Accordingly, the levels merely take note of divergence events and mark those points in time with levels. Traders then have a reference point from which they can evaluate further movement. The bull/bear/neutral colors used to plot the levels are also congruent with this view in that they are determined by price's position relative to the levels, which is how I think divergences can be put to the most effective use.

5 — Background
• The background can show a bull/bear gradient on four different calculations. You can adjust its brightness to make its visual importance proportional to how you use it in your analysis.

6 — Chart bars
• Chart bars can be colored using five different methods.
• You have the option of emptying the body of bars where volume does not increase, as does my TLD indicator, the idea behind this being that movement on bars where volume does not increase is less relevant.

7 — Intrabar Resolution
You can choose between three modes. Two of them are automatic and one is manual:
  a) Fast, Longer history, Auto-Steps (~12 intrabars): Optimized for speed and deeper history. Uses an average minimum of 12 intrabars.
  b) More Precise, Shorter History Auto-Steps (~24 intrabars): Uses finer intrabar resolution. It is slower and provides less history. Uses an average minimum of 24 intrabars.
  c) Fixed: Uses the fixed resolution of your choice.
Auto-Steps calculations vary for 24/7 and conventional markets in order to achieve the proper target of minimum intrabars.
You can choose to view the intrabar resolution currently used to calculate delta volume. It is the default.
The proper selection of the intrabar resolution is important. It must achieve maximal granularity to produce precise results while not unduly slowing down calculations, or worse, causing runtime errors.

8 — Markers
Six markers are available:
1. [I]Combined Balances Agreement: All three Bar Balances are either bullish or bearish.
2. [I]Up or Down % Agrees With Bar: An up marker will appear when the percentage of up intrabars in an up chart bar is greater than the specified percentage. Conditions mirror to down bars.
3. [I]Divergence confirmations By Price: One of the four types of balance calculations can be used to detect divergences with price. Confirmations occur when the bar following the divergence confirms the balance bias. Note that the divergence events used here do not include neutral intrabar events.
4. [I]Balance Transitions: Bull/bear transitions of the selected balance.
5. [I]Markers Bias Transitions: Bull/bear transitions of the Markers Bias.
6. [I]Divergence Confirmations By Line: Marks points where the line first breaches a divergence level.
Markers appear when the condition is detected, without delay. Since nothing is plotted in realtime, markers do not appear on the realtime bar.

9 — Settings
• Two modes can be selected to dampen the line on the ratio of neutral intrabars.
• A distinct weight can be attributed to the count of the latter half of intrabars, on the assumption that later intrabars may be more important in determining the outcome of chart bars.
• Allows control over the periods of the different moving averages used in calculations.
• The default periods used for the various calculations define the following hierarchy from slow to fast:
  Balance Averages: 50,
  Balance Momentum: 20,
  Dual Up/Down Averages: 20,
  Marker Bias: 10.


█ LIMITATIONS

• This script uses a special characteristic of the `security()` function allowing the inspection of intrabars—which is not officially supported by TradingView.
• The method used does not work on the realtime bar—only on historical bars.
• The indicator only works on some chart resolutions: 3, 5, 10, 15 and 30 minutes, 1, 2, 4, 6, and 12 hours, 1 day, 1 week and 1 month. The script’s code can be modified to run on other resolutions, but chart resolutions must be divisible by the lower resolution used for intrabars and the stepping mechanism could require adaptation.
• When using the "Line vs Divergence Levels — Dual Color Gradient" color mode to fill the line, background or chart bars, keep in mind that a line calculation mode must be defined for it to work, as it determines gradients on the movement of the line relative to divergence levels. If the line is hidden, it will not work.
• When the difference between the chart’s resolution and the intrabar resolution is too great, runtime errors will occur. The Auto-Steps selection mechanisms should avoid this.
• Alerts do not work reliably when `security()` is used at intrabar resolutions. Accordingly, no alerts are configured in the indicator.
• The color model used in the indicator provides for fancy visuals that come at a price; when you change values in Inputs, it can take 20 seconds for the changes to materialize. Luckily, once your color setup is complete, the color model does not have a large performance impact, as in normal operation the `security()` calls will become the most important factor in determining response time. Also, once in a while a runtime error will occur when you change inputs. Just making another change will usually bring the indicator back up.


█ RAMBLINGS

Is this thing useful?
I'll let you decide. Bar Balance acts somewhat like an X-Ray on bars. The intrabars it analyzes are no secret; one can simply change the chart's resolution to see the same intrabars the indicator uses. What the indicator brings to traders is the precise count of up/down/neutral intrabars and, more importantly, the calculations it derives from them to present the information in a way that can make it easier to use in trading decisions.

How reliable is Bar Balance information?
By the same token that an up bar does not guarantee that more up bars will follow, future price movements cannot be inferred from the mere count of up/down/neutral intrabars. Price movement during any chart bar for which, let's say, 12 intrabars are analyzed, could be due to only one of those intrabars. One can thus easily see how only relying on bar balance information could be very misleading. The rationale behind Bar Balance is that when the information mined for multiple chart bars is aggregated, it can provide insight into the history behind chart bars, and thus some bias as to the strength of movements. An up chart bar where 11/12 intrabars are also up is assumed to be stronger than the same up bar where only 2/12 intrabars are up. This logic is not bulletproof, and sometimes Bar Balance will stray. Also, keep in mind that balance lines do not represent price momentum as RSI would. Bar Balance calculations have no idea where price is. Their perspective, like that of any historian, is very limited, constrained that it is to the narrow universe of up/down/neutral intrabar counts. You will thus see instances where price is moving up while Balance Momentum, for example, is moving down. When Bar Balance performs as intended, this indicates that the rally is weakening, which does necessarily imply that price will reverse. Occasionally, price will merrily continue to advance on weakening strength.

Divergences
Most of the divergence detection methods used here rely on a difference between the bias of a calculation involving a multi-bar average and a given bar's price direction. When using "Bar Balance on Bar" however, only the bar's balance and price movement are used. This is the default mode.
As usual, divergences are points of interest because they reveal imbalances, which may or may not become turning points. I do not share the overwhelming enthusiasm traders have for the purported ability of bullish/bearish divergences to indicate imminent reversals.

Superfluity
In "The Bed of Procrustes", Nassim Nicholas Taleb writes: [I]To bankrupt a fool, give him information. Bar Balance can display lots of information. While learning to use a new indicator inevitably requires an adaptation period where we put it through its paces and try out all its options, once you have become used to Bar Balance and decide to adopt it, rigorously eliminate the components you don't use and configure the remaining ones so their visual prominence reflects their relative importance in your analysis. I tried to provide flexible options for traders to control this indicator's visuals for that exact reason—not for window dressing.


█ NOTES

For traders
• To avoid misleading traders who don't read script descriptions, the indicator shows nothing in the realtime bar.
• The Data Window shows key values for the indicator.
• All gradients used in this indicator determine their brightness intensities using advances/declines in the signal—not their relative position in a fixed scale.
• Note that because of the way gradients are optimized internally, changing their brightness will sometimes require bringing down the value a few steps before you see an impact.
• Because this indicator does not use volume, it will work on all markets.

For coders
• For those interested in gradients, this script uses an advanced version of the Advance/Decline gradient function from the PineCoders Color Gradient (16 colors) Framework. It allows more precise control over the range, steps and min/max values of the gradients.
• I use the PineCoders Coding Conventions for Pine to write my scripts.
• I used functions modified from the PineCoders MTF Selection Framework for the selection of timeframes.


█ THANKS TO:

— alexgrover who helped me think through the dampening method used to attenuate signal lines on high ratios of neutral intrabars.
— A guy called Kuan who commented on a Backtest Rookies presentation of their Volume Profile indicator. The technique I use to inspect intrabars is derived from Kuan's code.
— theheirophant, my partner in the exploration of the sometimes weird abysses of `security()`’s behavior at intrabar resolutions.
— midtownsk8rguy, my brilliant companion in mining the depths of Pine graphics. He is also the co-author of the PineCoders Color Gradient Frameworks.

May 1, 2020

Release Notes

Updated comments.

May 15, 2021

Release Notes

v2.0
• The problem where the indicator no longer plotted was fixed.
• Markers are now displayed as labels, which entails that only the last 500 markers will show.