Constructing a volatility-gated volume-flow measure

What the finished reading is

The complete volume-flow reading is a lookback sum of signed, capped volume divided by a lagged average of volume, then smoothed with a 3-bar exponential moving average. The volume-flow measure is that lookback ratio: it sums signed, capped volume and scales the total by a lagged average of volume.

Knobs a reader can set

The lookback length is an input bounded from 5 to 1300 with a default of 130. The volume-cap multiple is an input from 0 to 50 with a default of 2.5. Those two inputs set the window and the size of the bound.

Gates that sign, cap, or discard volume

The sign gate is a cutoff equal to 0.2 times a 30-bar standard deviation of log typical-price changes, multiplied by the close. That band around zero is the volatility-gate. Typical-price change is the bar-to-bar difference in the average of high, low, and close. It is used as the money-flow input and, in log form, as the volatility input.

A bar contributes positive capped volume only when typical-price change exceeds the cutoff, negative capped volume only when it falls below the negative cutoff, and zero when it stays inside the band.

Any volume print above a lagged simple moving average of volume times the cap multiple is replaced by that bound before it can enter the sum. The volume-cap is that upper bound, set as a multiple of a lagged moving average of volume.

The short-history fallback

When a listing has less than one year of history, the gated lookback is replaced by a cumulative signed-volume series that adds volume on a higher typical price and subtracts it on a lower typical price. That signed-volume fallback is a running total used when the sample is too short for the gated lookback.

A three-way display split

Directional volume for display is split into three histogram series: above-cutoff, below-cutoff, and inside-band, because a single formula cannot assign bar colors. The three-way volume split is that display construction. It plots capped volume as separate above-gate, below-gate, and inside-band histograms.

The three-way volume histograms compute their volume-cap from a one-bar-lagged 50-period simple moving average of volume.