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Volume near Price Level - Detect Strong Support & Resistance Areas
Volume near price is a technical indicator that returns the total volume near the current price level that occurred in previous periods. For each period, the indicator calculates the total volume of the previous N period where the close price was between the current price and a threshold value (+-). The higher the indicator value the more shares were traded near the current price level and this also indicates that the current level is a potential strong support or resistance.
The trading indicator lets you define the lookback and threshold values. Example:
dis1 = avg(high - low, 300);
a = VolumeNear(300, dis1);
The lookback period is set to 300 and the threshold value is set to the average distance between the high and low prices.
Here is an example that shows you how to detect a strong support area:
- First, I calculate the price position within the high/low area to determine whether we are near a potential support or a resistance.
- Then I measure the strength of the support by checking the "VolumeNear" indicator value with its highest value over the last 100 periods.
The formula to detect a strong support area is:
period = 300;
dis1 = avg(high - low, period);
a = VolumeNear(period, dis1);
closeposition = ((close - llv(low, 100)) / (hhv(high, 100) - llv(low, 100)));
support1 = (a == hhv(a, 100)) and closeposition < 0.3;
plot(support1, "Support Area", colorRed, ChartLine, StyleOwnScale);
