Normalized Volume Indicator for MT4

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Normalized Volume Indicator for MT4

Introduction to the Normalized Volume Indicator

Volume is a very important information that traders should take note of. This is because volume confirms whether a candle-based signal has significant volume behind it or not. The Normalized Volume Indicator is one of the tools that traders can use to observe trading volume.

What is the Normalized Volume Indicator?

The Normalized Volume Indicator is a trading tool which was developed to help traders objectively assess the volume of trades over a given time window. It has a separate indicator which displays a line representing the total volume of trades over a given time period.

Normalized Volume Indicator for MT4

The line that the Normalized Volume Indicator plots is characteristically very jagged because the line it displays is a total volume of trades over a given period. This means that the inputs of volume would have a great impact on the movement of the line that it plots. This also allows traders to visually identify volume spikes which can be a very useful trading information.

How the Normalized Volume Indicator Works?

The Normalized Volume Indicator has a very simple algorithm which sums up the total volume traded over a given number of periods.

It is preset to use nine periods. In this case, it would sum up the total volume over the past nine period window. The resulting value would then be plotted as a point on the line it draws on its indicator window. On the next period, the indicator would rollover and remove the farthest volume value from the total normalized volume and add the current volume. It repeats this cycle as the indicator plots its line.

How to use the Normalized Volume Indicator for MT4

The Normalized Volume Indicator has just one variable which can be modified within its indicator settings.

How the Normalized Volume Indicator Works

“Volume Period” refers to the number of periods the indicator would retrieve the volume data from to calculate for its Normalized Volume.

Normalized Volume Versus Volume

The Normalized Volume Indicator presents a very similar information with the regular Volume data which is readily available on every MT4 platform. This is because Normalized Volume is derived from the Volume data feed.

The chart below shows a comparison between Normalized Volume and Volume which is represented by the bars on the lower portion of the price chart.

Normalized Volume Versus Volume

You would notice that the volume spikes on the Normalized Volume window coincide with the high Volume bars. However, there are also some divergences with regards to the height of the spikes.

Increasing the Volume Period

Increasing the total periods used for the indicator would increase the value that the indicator plots but it will also flatten the volume spikes displayed since the impact of the most recent volume input would be lesser. However, the line that it plots would still be characteristically very jagged and volume spikes would still be discernible.

The chart below shows a Volume Period Indicator which calculates for 50 periods.

Increasing the Volume Period

Conclusion

The Normalized Volume Indicator is a useable indicator since it provides information regarding how volume moves. It is also very similar to the regular Volume bars which is readily available on the MT4 platform, and which many seasoned traders also use. It all boils down to which type of presentation the trader would prefer, either the regular Volume bars or the Normalized Volume line.

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Normalized Volume Indicator for MT4

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