Objective Analysis of Spread (VSA)
Note: Pardon for a busy chart. It really is irrelevant for this indicator. Just look at the bottom part of the chart for the indicator (SpAn).
This script is meant to add objectivity to the estimation of spread in VSA. This is best used with a similar volume indicator that measures volume in the same fashion, but a simple rule of "higher/lower than the previous 2 bars" for estimation of volume size can be used as well in conjunction with this indicator.
A 30-period (adjustable) SMA difference between the high and the close is used to estimate average spread. This value is used to plot bands of 0.8 and lower (blue) standard deviation for narrow spread, 0.8-1.3 (yellow) for medium spread, 1,3-1.8 (green) for wide spread, 1.8-3 (red) for ultra-wide spread. Anything above 3 (no color) is plain crazy. =)
How to use:
A histogram of each bar spread is plotted as well. See where each histogram bar ends. For example, if it ends in the green area, this bar has a wide spread.
Added indicator:
An ATR (14-period, adjustable) is plotted as a black line for your reference. May be used for stops. Otherwise, it is not necessary for VSA.
Feedback and suggestions for improvement are welcome.
This script is meant to add objectivity to the estimation of spread in VSA. This is best used with a similar volume indicator that measures volume in the same fashion, but a simple rule of "higher/lower than the previous 2 bars" for estimation of volume size can be used as well in conjunction with this indicator.
A 30-period (adjustable) SMA difference between the high and the close is used to estimate average spread. This value is used to plot bands of 0.8 and lower (blue) standard deviation for narrow spread, 0.8-1.3 (yellow) for medium spread, 1,3-1.8 (green) for wide spread, 1.8-3 (red) for ultra-wide spread. Anything above 3 (no color) is plain crazy. =)
How to use:
A histogram of each bar spread is plotted as well. See where each histogram bar ends. For example, if it ends in the green area, this bar has a wide spread.
Added indicator:
An ATR (14-period, adjustable) is plotted as a black line for your reference. May be used for stops. Otherwise, it is not necessary for VSA.
Feedback and suggestions for improvement are welcome.
Versionsinformation:
This version added:
1. Spread histogram consists of 2 colors: Black for spread of the current bar (true range) and Orange for body only spread.
2. Color background shows where the spread of the current bar falls in relation to a simple moving average of the spread (14 period, adjustable). The blue zone is 0.8 of the spread SMA or lower (very low spread), yellow for 0.8 and 1.3 of the SMA (normal spread), green for 1.3 and 2 of the SMA (high spread, healthy), red for 2 and 3 (very high spread). Anything above red can be considered ultra wide spread.
3. Black line for ATR.
Not all information may be important for developing a trading strategy, but for pure spread analysis (even if only theoretical) every bit of information on display is useful when coupled with volume analysis and analysis of bar shapes.
1. Spread histogram consists of 2 colors: Black for spread of the current bar (true range) and Orange for body only spread.
2. Color background shows where the spread of the current bar falls in relation to a simple moving average of the spread (14 period, adjustable). The blue zone is 0.8 of the spread SMA or lower (very low spread), yellow for 0.8 and 1.3 of the SMA (normal spread), green for 1.3 and 2 of the SMA (high spread, healthy), red for 2 and 3 (very high spread). Anything above red can be considered ultra wide spread.
3. Black line for ATR.
Not all information may be important for developing a trading strategy, but for pure spread analysis (even if only theoretical) every bit of information on display is useful when coupled with volume analysis and analysis of bar shapes.