Momentum Indikator (Avg Volume)

Momentum Indicator (Avg Volume)
1. Purpose of the Indicator

The WMT Momentum Indicator (Avg Volume) is designed to highlight strong price movements accompanied by increased trading volume.
It specifically filters for trading days where:

volume is increasing,

volume is above its average,

and the percentage price movement exceeds a defined threshold.

The goal is to identify momentum days early — both bullish and bearish.

2. Display & Visualization

Visualization: Histogram (columns)

Panel: Separate indicator window (overlay = false)

Y-Axis: Percentage price change compared to the previous close

Colors:

🟢 Green: Positive daily movement (Close ≥ Open)

🔴 Red: Negative daily movement (Close < Open)

Zero Line: Reference line separating positive and negative momentum

3. Input Parameters
Parameter Description Default
+/- Movement Threshold (%) Minimum absolute daily price movement in percent 4.0 %
Volume Average (Days) Period for the moving average of volume 20 days
4. Logic & Calculations
4.1 Volume Conditions

The indicator only considers days where:

Volume is higher than the previous day

volHigherPrev = volume > volume[1]


Volume is above the moving average

avgVolume = ta.sma(volume, volLength)
volAboveAvg = volume > avgVolume


➡️ This ensures that only days with unusually high market participation are taken into account.

4.2 Price Movement

Percentage change vs. previous close

priceMovePct = (close - close[1]) / close[1] * 100


Absolute movement

absMovePct = math.abs(priceMovePct)


Intraday direction

priceMoveDay = close - open

4.3 Direction Logic
Condition Meaning
priceMoveDay ≥ 0 Bullish day (green)
priceMoveDay < 0 Bearish day (red)
4.4 Main Condition (Signal Filter)

A bar is displayed only if all of the following conditions are met:

showBar =
volHigherPrev and
volAboveAvg and
absMovePct >= moveThreshold


➡️ Interpretation:
Only strong price movements with rising and above-average volume are visualized.

5. Color Logic
barColor =
showBar and volGreen ? color.green :
showBar and volRed ? color.red :
na

Color Meaning
Green Strong bullish momentum
Red Strong bearish momentum
No bar Conditions not met
6. Plot Description
Momentum Histogram
plot(
showBar ? priceMovePct : na,
style = plot.style_columns
)


Bars are plotted only when showBar = true

Bar height represents the percentage change vs. previous close

Direction and color indicate momentum direction

Zero Line
hline(0, "0-Line")


Visual separation between positive and negative momentum

Helps with quick interpretation

7. Typical Use Cases

Identifying breakout days

Confirming trend continuation

Detecting distribution or accumulation

Filtering for momentum trading & swing trading

Complementing price action or volume-based strategies

8. Practical Interpretation

Tall green bar:
→ Strong buying pressure, potential trend start or continuation

Tall red bar:
→ Strong selling pressure, possible trend exhaustion or short signal

No bars:
→ Market without relevant momentum (sideways / low volume)