This indicator aims at responding the question: is the current trend supported by volume?
The concept and formula
The central concept is the Effective Volume, calculated as follow:
effectiveVolume = volume * (close - open) / (high - low)
Then the Effective Volume Z-Score indicator is calculated by smoothing the effective volume and applying the z-score function:
zscore(x) = (x - mean) / stdev
Essentially, the indicator's value represents the number of standard deviations of the effective volume away from the mean.
How to use it
This indicator should be used for trend confirmation.
For an uptrend, the bigger the indicator value, the greater the volume support, while for a downtrend, the lower the indicator value, the greater the volume support.
Divergences are also important, as with every volume indicator.