Know in Deep about Volume Oscillator indicator in 2021

Volume Oscillator 

We all know that in the stock market volume is like oxygen. Volume is the spinal cord of the stock market. It is the only volume that creates trends and all other stuff. 

Our indicator volume oscillator's basic work is to measure volume. It measures the relationship between two moving averages. It calculates fast and slow volume moving averages. The difference between the two is known as Histogram. 

The period for fast volume moving average is 14 days and for slow volume moving average is 28 days. The histogram always fluctuates below and above the zero lines. No doubt in these indicators too positive value is above the zero lines and a negative value is below the zero lines. 

A positive value tells that the market is supportive. A negative value says that there is no support and the price may become normal to it. 

Volume oscillator is strongly used by traders to find support and resistance breaks. There is a strong move when support breaks on increasing volume. But when resistance breaks there is more buying intensity. 

Volume is probably one of the oldest off-chart technical indicators you can find in technical analysis. So, as I look at the technical indicators, I am curious about the possible use of the volume oscillator indicator.

Calculation

Volume Oscillator = [(Shorter Period SMA of Volume – Longer Period SMA of Volume) / Longer 

Period SMA of Volume ] * 100

Strength: 

• An increase or decrease in price with an increase in volume can be considered as a sign of strength in the prevailing trend. 

• Therefore, when the fast volume moving average (default 14-period) is above the slow volume moving average (default 28-period), the volume oscillator is above the zero lines and can confirm the direction of the price, whether it is up or down.

Weakness: 

• An increase or decrease in price due to a decrease in volume can be considered as a sign of weakness in the prevailing trend. 

• Therefore, when the light average of the fast sound is below the average of the slow sound, the volume oscillator is below the zero lines and may signal a lack of strength and confidence towards the price.

Like any other indicator, the volume oscillator can be useful when combined with price action and trend lines. However, I think, in the long run, it’s best to have a solid understanding of the volume indicator to make sure you can see the big picture and not get too lost in the spikes of the volume oscillator.

Conclusion:

Percentage volume oscillator (PVO) is a motion indicator applied to a volume. This oscillator can be very choppy as there is no volume trend. Bullish and bearish diversions are not suitable for PVO.

Instead, it is better to look for signs of increasing noise with the chart moving towards the positive area and decreasing with moving to the negative area. Increasing the volume can confirm support or resistance break.

Similarly, low noise can cause a bump or a significant support brake to become less strong. As with all technical indicators, it is important to use a percentage volume oscillator (PVO) in combination with other aspects of technical analysis, such as chart patterns and momentum oscillators.

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