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2013issue C1314-22

Restore volume balance before adding another price-time indicator

Retail charting software commonly ships with 70 to more than 100 built-in indicators, and about 75% to 80% of them are price-and-time formulas. Editorial view: a usable short-term setup starts by restoring quantity as a control signal rather than stacking more oscillators.

  • Retail charting software commonly ships with 70 to more than 100 built-in indicators, far more than a trader will use regularly.
  • About 75% to 80% of available indicators are price-and-time formulas, versus about 20% to 25% that are quantity-and-time formulas, which biases retail platforms toward price analysis.
  • More than 80% of market activity is controlled by the lower five of nine participant groups, activity that is seldom visible in price-and-time indicators alone.
  • Volume at price can compare buyer versus seller dominance at each level, and volume Rate of Change is used to flag reversals, balance, and exhaustion before price turns.
Entries in this reading3 entries
On-balance volume25 readingsCurrent trackRate of Change50 readingsVolume-price analysis129 readings

A catalog larger than the working set

Retail charting software commonly ships with 70 to more than 100 built-in indicators, far more than a trader will use regularly. Editorial view: the extra menu items are easy to treat as a shortage of oscillators. The working problem is that the catalog overweights price versus time and underweights quantity.

Price, time, and quantity

Every chart indicator is built from at least two of the three primary series, price, time, and quantity, and only a few combine all three. About 75% to 80% of available indicators are price-and-time formulas, versus about 20% to 25% that are quantity-and-time formulas, which biases retail platforms toward price analysis.

Why the first tools still fill the menu

Many widely used indicators were written decades earlier for a different market structure and were among the first tools ported into retail charting systems in the 1990s.

Nine participant groups

Nine market-participant groups enter and exit at different stages of a trend and change how price and volume behave. More than 80% of market activity is controlled by the lower five participant groups, activity that is seldom visible in price-and-time indicators alone.

Volume-price analysis, On-balance volume, and Rate of Change

Volume at price can be color-coded to compare buyer versus seller dominance at each price level. Volume Rate of Change is presented as a way to flag trend reversals, tops, bottoms, and sudden sentiment shifts before price turns. Editorial view: those two readings, together with On-balance volume, put quantity back in as the control signal instead of adding another price-time oscillator.

Balance and exhaustion in volume Rate of Change

Horizontal, softer waves in volume Rate of Change are described as buy-side and sell-side volume nearly in balance, forming consolidations. An upward spike in that range is treated as upside volume exhaustion.

What belongs at the front of the platform

The historical argument is that platforms should emphasize quantity-and-time and price-time-quantity indicators over predominantly price-and-time tools. New indicators should be tested for nuances, convergences, divergences, and extreme patterns.

IBM daily volume rate of change, October 2011 to March 2012

Quantity on daily IBM does not drift; it sits in quiet waves near zero while buyers and sellers are even, then jumps to about plus 7.5 million or minus 10 million shares when one side exhausts. Those spikes are the early control signal the article wants in front of another price oscillator. Points were read from the left-hand million-share scale of the source chart; the last session is the printed 367,100-share value.
Quantity on daily IBM does not drift; it sits in quiet waves near zero while buyers and sellers are even, then jumps to about plus 7.5 million or minus 10 million shares when one side exhausts. Those spikes are the early control signal the article wants in front of another price oscillator. Points were read from the left-hand million-share scale of the source chart; the last session is the printed 367,100-share value.IBM · Daily · 2011-10-24T00:00:00.000Z to 2012-03-02T00:00:00.000Z

The source fixes a 24-period volume rate of change on daily IBM bars. Digitized points are rounded to the nearest half-million shares; only the final print is exact.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
46 of 46 in the Rate of Change track
1992Track finished · Next track: Reversal tradingReversing at maximum-adverse-excursion stops after failed entries10 readings
All readings on this track · 46 readings
  1. 1985Constructing excess and momentum difference-curve oscillators
  2. 1988Five reading rules for smoothed indicator charts
  3. 1989Momentum overlays that speed moving-average oscillators
  4. 1990A laboratory template that constructs Rate of Change as a pane module
  5. 1991Volume-scaled rate of change as a momentum construction
  6. 1991Three-indicator market overview from tape, sentiment and rates
  7. 1991Three-component trend model with rate-of-change filters
  8. 1992A KST oscillator from a weighted rate-of-change stack
  9. 1992Four-window weighted rate-of-change composite
  10. 1992Constructing multi-span smoothed rate-of-change filters
  11. 1992Constructing a four-horizon summed rate of change
  12. 1992Constructing KST from four weighted smoothed rates of change
  13. 1992Constructing a composite from weighted smoothed rates of change
  14. 1992Three-horizon KST maturity alignment
  15. 1992Construct a bond-led dividend-to-bond-yield regime first
  16. 1992Constructing relative-strength KST from weighted rate-of-change
  17. 1993Constructing a volume oscillator from average ratios and smoothed rate of change
  18. 1994Gold as a cycle clock for commodities and yields
  19. 1994Constructing a composite from weighted, smoothed rate-of-change windows
  20. 1994Constructing gold-mining rate-of-change tripwires for Treasury bonds
  21. 1994A capacity-stress checklist across commodities, bonds, and breadth
  22. 1994Rate of change parameters for testable entries
  23. 1994Constructing rate-of-change midpoints, lookbacks and divergence
  24. 1994Lead oscillator breaks need price trendline confirmation
  25. 1994Nested averages for an annual momentum curve
  26. 1994Evaluating a Coppock-style rate of change as a bottom-regime filter
  27. 1995A weighted eleven-month Dow rate of change as one testable timing procedure
  28. 1996Named lookbacks, thresholds, and streaks for entry rules
  29. 1997A midpoint rate-of-change test for bond trend follow-through
  30. 1997Constructing a short-rate-adjusted equity momentum filter
  31. 1998Daily momentum rank-churn as a portfolio-construction problem
  32. 1999Constructing a lagged rate of change cycle system
  33. 2000A triple delay line then a one-bar elliptic oscillator
  34. 2001Confirming rate of change divergences with price
  35. 2001Momentum trendline breaks need price confirmation
  36. 2001Market breadth, On-balance volume, and Rate of Change as a combined timing framework
  37. 2001Know Sure Thing with stacked horizons and trendline confirmation
  38. 2003Constructing a mechanical system from a rate of change condition
  39. 2003Constructing momentum from two closes and spotting divergence
  40. 2003Formula choice tilts which momentum mismatches count as divergences
  41. 2004RSI and momentum agreement as an asymmetric filter
  42. 2005Constructing price-normalized moving-slope hybrids
  43. 2005Unsigned speed gates on a fixed average-cross pair
  44. 2007Rebuilding rate of change as a path-weighted oscillator
  45. 2008Construct Special K so short-horizon signals stay inside the primary trend
  46. 2013Restore volume balance before adding another price-time indicator
By fieldIndicators and filters682 readingsBy year201398 readings
All 50 readings tagged Rate of Change
Also on Rate of Change5 readings
2001Market breadth, On-balance volume, and Rate of Change as a combined timing frameworkOn-balance volume1988Constructing volume-confirmation overlays on OHLC spreadsheet chartsOn-balance volume1989Constructing a yield-curve volume-breadth compositeOn-balance volume1990Constructing a signed-range negative volume lineOn-balance volume1990Futures-signed on-balance volume constructionOn-balance volume