Constructing tick-weighted money flow and price divergences

On-balance volume, price-weighted volume, and tick-level money flow accumulate signed volume in different ways. Non-block money flow and the accumulation window are further construction choices.

Daily close sign and price-weighted volume

Daily on-balance volume is a cumulative volume ledger that adds session volume on up closes and subtracts it on down closes. Because the full session's volume takes the sign of the close, a 1% day and a 2% day receive the same volume weight.

A price-weighted volume ledger multiplies each session's volume by that day's price change before the signed accumulation. Larger moves therefore receive more influence than in the unweighted ledger.

Tick-level money flow

Tick-level money flow is a cumulative, trade-by-trade series. It adds price times size on upticks and subtracts price times size on downticks, computed from every print rather than from a single daily close.

Last price can be unchanged while cumulative money flow falls if larger downtick size outweighs smaller uptick size in the tape sample.

Confirmation and divergence

The same overlay is read as confirmation when price and cumulative money flow share similar slope over the same window. It is read as divergence when those slopes conflict. Divergence is a plotted split in direction or slope between price and the cumulative money-flow series.

Name, basket, and composite

The same money-flow construction can be run on a single name, an industry basket, or an exchange composite. Those pictures need not agree.

Large-print filters and the accumulation window

Non-block money flow excludes prints larger than 10,000 shares. The illustrated series drops every trade larger than 10,000 shares, and the construction note is to inspect both filtered and unfiltered totals before judging a plot.

The construction notes treat the series as least reliable on illiquid names and on issues priced below $20 because a single large print can warp the cumulative path.

Because the indicator is a cumulative sum, changing the accumulation window changes the picture, so more than one time span is part of the review.