Online Trading Concepts

Volume Accumulation

Volume Accumulation

  1. Volume Accumulation Defined
  2. Volume Accumulation Divergences

The Volume Accumulation indicator combines volume and a price-weighting that attempts to show the strength of conviction behind a trend; the Volume Accumulation indicator might prove useful in uncovering divergences. The formula for the Volume Accumulation formula is shown below:

The formula only gives positive volume to the day if the close is higher than the midpoint of the high and low. If the close is towards the lower half of the range of the price action, then volume is negative for the day. A chart compares the Volume Accumulation indicator with the On Balance Volume indicator that adds positive volume if the close is higher than the previous close, even if the close is only a penny higher, is given next of the stock Citigroup (C):

Volume accumulation confirming downtrend

As can be seen in the chart above, Volume Accumulation was giving a more realistic representation of what the stock of Citigroup was doing - going downward. The logic behind the Volume Accumulation technical analysis indicator is follows:

A potential use of the Volume Accumulation indicator is to confirm price movements and show divergences between the indicator and prices, signaling a possible reversal in trend. This is discussed on the next page.

Next Page - Volume Accumulation Divergences

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