VolDivAlgo

VOLUME DIVERGENCE STRATEGY

Quick Facts:

• Category: Volume Analysis / Divergence
• Markets: All markets with volume
• Timeframes: 1H, 4H, Daily

Overview

The VolDiv Algorithm detects divergences between price action and volume—a powerful signal that often precedes significant moves. When price makes new highs but volume declines (or vice versa), it signals weakening conviction and potential reversal.

Volume divergence often leads price divergence, making it an early warning indicator for trend changes.

How It Works

VOLUME MEASUREMENT Track volume behavior:

• Average volume over lookback period
  • Volume trend (rising or falling)
  • Volume at price pivots

DIVERGENCE DETECTION

BEARISH VOLUME DIVERGENCE:

• Price makes higher high
  • Volume at high is lower than previous high
  • Signals weakening buying interest

BULLISH VOLUME DIVERGENCE:

• Price makes lower low
  • Volume at low is lower than previous low
  • Signals weakening selling interest

CONFIRMATION Validate divergence:

• Minimum divergence percentage
  • Volume trend confirmation
  • Price reversal pattern (optional)

Key Parameters

DETECTION:

• pivotLookback (5): Bars for pivot detection
  • minVolumeDivPct (20): Minimum volume drop %
  • maxPivotDistance (30): Maximum bars between pivots

FILTERS:

• requirePriceReversal (false): Need price confirmation
  • volumeTrendFilter (true): Check volume trend

ENTRY:

• entryDelay (1): Bars after divergence for entry
  • useVMConfirmation (true): Require VMAlgo confirmation

Best Use Cases

✅ EARLY REVERSAL DETECTION before price confirms ✅ TREND EXHAUSTION identification ✅ WEAK BREAKOUT detection (low volume breaks) ✅ CONFIRMATION for other reversal signals