Similarities and differences among volume based indicators

sh50 · #1 5th February 2005, 06:45 AM

OBV- On Balance Volume is a running total of volume. It seeks to show if volume is flowing into or out of a security. When the security closes higher than the previous close, all of the day's volume is considered up-volume. When the security closes lower than the previous close, all of the day's volume is considered down-volume.

Accumulation/Distribution- A portion of each day's volume is added or subtracted from a cumulative total. The nearer the closing price is to the high for the day, the more volume added to the cumulative total. The nearer the closing price is to the low for the day, the more volume subtracted from the cumulative total. If the close is exactly between the high and low prices, nothing is added to the cumulative total.

Chakin’s oscillator-The closer a stock or average closes to its high, the more accumulation there was. Conversely, if a stock closes below its midpoint for the day, there was distribution on that day. The closer a stock closes to its low, the more distribution there was.

Chaikin Money Flow -Developed by Marc Chaikin, the Chaikin Money Flow oscillator is calculated from the daily readings of the Accumulation/Distribution Line. market strength is usually accompanied by prices closing in the upper half of their daily range with increasing volume. Likewise, market weakness is usually accompanied by prices closing in the lower half of their daily range with increasing volume.

In all of the above one is supposed to compare the volume advances/declines to prices though in chakin oscillator, one can look for divergences with A/D lines. It is obvious from the above that the accumulation distriubution was an improvement on obv which in and Chakin’s oscillator an improvement on Accumulation/distribution. What is the difference between Chakin’s oscillator and Chakin’s money flow? I am a little hazy on this. Somebody please clarify

The positve and negative volume index is quite interesting:-.

The Positive Volume Index (or PVI) by Norman Fosback, is based on the idea that on days when volume increases, the unsophisticated "crowd" have joined in, and a trend may become more marked. On the other side of the trading coin, if a day has decreased volume, then the "smart money" is moving into position to take advantage of the crowd. If the PVI is above its 1 year MA there's a 79% chance that an uptrend is in progress. If the PVI is below its 1 year MA, theres a 33% chance a bear market is occurring. Any day trading system can take advantage of knowing where the short and intermediate trend is, and the PVI is one more confirmation of this. The Positive Volume Index function determines the trend in market prices when the volume is increasing, theoretically when less informed investors are trading.

The Negative Volume Index function determines the trend in market prices when the volume is declining, theoretically when informed traders are trading. The Negative Volume Index is typically compared to a one-year (255-trading-day) moving average of its value. When the index increases above this value, informed investors have typically been buying this security, indicating the prices should continue to increase. When the index increases below this value, informed investors have typically been selling, indicating a possible decrease.

Here is an attached file(pn2.doc) to show various parameters of bullish/bearish.

The trade volume index is supposed to be a substitute of OBV in day trading. A day trader can perhaps provide better explanation

The money flow index is like the RSI of volume

Volume oscillator is like the price oscillator:-

In rallies vo should rise. When it reverses from obt condition, indicative of some correction. When prices move sideways or decline, volume shld contract. The difference between V and P Osc is that an obt V reading can be and often is associated with an oversold mkt. Volume expands during a selling climax. It is a well known technical characteristic that an increase in price associated with declining volume is bearish.

Since volume precedes price and everything depends on volume for all practical purposes, hope more knowledgeable people will make handsome value additions.