Analysis through thousands of instruments across all timeframes over the years via CQG’s Entry Signal Evaluator, revealed some very consistent patterns in terms of how long trends can last before they enter there first correction, how long that correction typically lasts, before the most difficult part, which is whether the trend will restart. Part of understanding this process was to assess how long it takes before a swing pattern or Peak forms in that trend.
Peak Volume has particular application to stocks to identify ends of trends when volume expands around correction points. The difference between the Volume based Peak and normal Peak, is the fact that Peak points are qualified by an expansion of Volume over and above a user defined long term average of Volume at Peak points. This is normally set at least 1.25 times normal range (See page 230 of Trading Time).
Interpretation
The thresholds for this study vary considerably from the standard Peak, in that Peak Vol can go for an extended period without changing value. This is normally true when a trend is beginning as nobody knows it’s a new trend and volumes are relatively low compared to the long term average of volume. However, when trends develop and go beyond the normal trend cycle (65 bars), more rapid changes in Peak Volume should be evident as volume expands on any corrections to that trend. The trend has ended when price closes beyond the Peak Volume level.
PeakVol Parameters
Display Parameters
|
Name |
Default |
Definition |
|
LLev |
2 |
Qualifies how many bars are to the left of the mid point. |
|
RLev |
2 |
Qualifies how many bars are to the right of the mid point. |
|
Mult |
1.0 |
Qualifies the threshold for expansion of Volume to trigger a change in the Count and should be set beyond the default. |
|
Len |
250 |
Qualifies how many bars that lookback period is to compare Volume. |