In today’s modern market structure, where automated order types dominate, traditional oscillators may fall short of providing accurate technical analysis. However, there’s a different type of oscillator that excels in such conditions – the Time Segmented Volume (TSV).
This article aims to explore the significance of volume oscillators, highlight the distinctive features of TSV, and demonstrate its effectiveness as a leading indicator for stock price movements.
Table of Contents
Understanding Volume Oscillators
Volume oscillators differ from price oscillators by providing valuable insights into stock price dynamics based on volume analysis. Instead of signaling overbought or oversold price levels, volume oscillators like TSV offer information about stock price movements before they occur. This makes them essential tools for technical traders seeking to predict price direction, breakout moves, momentum runs, and potential tops or bottoms.
Time Segmented Volume (TSV)
A Game-Changing Volume Oscillator, Developed by Don Worden, TSV stands out as one of the most exceptional volume oscillators ever created. In today’s automated marketplace, identifying dark pool and large-lot activities becomes crucial, making TSV an invaluable indicator for traders.
The formula for calculating Time Segmented Volume (TSV) involves comparing various time segments of both price and volume. The baseline represents the zero line. Here is the formula for TSV:
TSV = \sum \left( \frac{{\text{{Volume}} \times (\text{{Price}} - \text{{Previous Price}})}}{{\text{{Previous Price}}}} \right)
In this formula:
- Volume refers to the volume of the stock during a specific time segment.
- Price represents the closing price of the stock during the same time segment.
- Previous Price refers to the closing price of the stock in the previous time segment.
The formula calculates the cumulative value by summing the products of volume and the percentage change in price from the previous time segment. TSV provides insights into the money flow in or out of a stock based on these calculations. Positive values indicate accumulation or buying pressure, while negative values indicate distribution or selling pressure.
Unlocking Trading Opportunities with Time-Segmented Volume(TSV)
TSV serves as a rare stock volume oscillator, offering leading indicator signals that greatly benefit short-term traders. It proves effective across various trading styles, including Swing Trading, Momentum Trading, Position Trading, and Day Trading. As market structures rapidly evolve, Time Segmented Volume has emerged as a powerful indicator for predicting stock price movements.
This indicator could reveal and disseminate large-lot vs. small-lot activity. This is a crucial aspect of identifying dark pool, large-lot activity, which is so prevalent in today’s automated marketplace.
import numpy as np
import pandas as pd
def time_segmented_volume(close, volume, p1, p2, Mtype):
p1 = max(1, min(999, p1))
p2 = max(1, min(999, p2))
Mtype = max(0, min(6, Mtype))
MyVol = np.zeros(len(close))
MyVol[close > close.shift(1)] = volume * (close - close.shift(1))
MyVol[close < close.shift(1)] = -volume * (close - close.shift(1))
TSV = pd.Series(MyVol).rolling(p1).sum().values
Signal = pd.Series(TSV).rolling(p2, min_periods=Mtype).mean().values
return TSV, SignalImportant Points to Consider about Time Segmented Volume(TSV)
- TSV segments a stock’s price and volume by intervals, enabling traders to spot discrepancies and determine entry and exit points.
- Gathering data over a longer time frame provides a more comprehensive view, but traders should consider the lag time in daily trading patterns.
- While TSV indicates money flow in and out of a stock, it’s essential to supplement it with other tools for comprehensive price analysis.
TSV distinguishes itself with a cumulative formula rather than an average-based one. This ensures the indicator line remains stable even when data is dropped, as commonly observed in moving average-based formulas.
How to Interpret Time Segmented Volume(TSV) in live market
TSV acts as a leading indicator, relying on both price fluctuation and volume movement. Ideal entry and exit points are often found as the stock crosses the baseline level. Similar to on-balance volume (OBV), TSV measures the money flowing into or out of a particular stock.
Crucial TSV Signals:
- TSV crossing above the zero line indicates positive accumulation or buying pressure, suggesting a bullish sentiment.
- Conversely, TSV crossing below the zero line indicates distribution or selling pressure, often preceding a price decline.
- Divergences between price and TSV offer valuable insights into potential tops and bottoms, with consecutive divergences enhancing the reliability factor.
How to use Time Segmented Volume in trading Strategy
Traders can calculate TSV using various moving averages, which introduce a smoothing effect. However, longer moving averages may lag behind daily fluctuations, reducing sensitivity. Combining TSV with other indicators, such as moving averages or MACD, provides additional confirmation for trading decisions.
The Power of TSV for Bottom Formations: TSV excels in revealing incremental buying patterns during bottom formations. Its ability to expose bottoms before they appear on price charts offers a distinct advantage to traders seeking early entry opportunities.
TSV in Different Market Conditions: Unlike price and time oscillators designed for specific market conditions, volume oscillators like TSV are versatile and work well in various market scenarios. TSV’s ability to oscillate and differentiate between accumulation and distribution makes it a top choice among traders. Combining TSV with Bollinger Bands (%B) creates a unique indicator for position traders.
Conclusion
Time Segmented Volume (TSV) stands as a powerful volume oscillator, providing leading indicator signals invaluable for short-term trading. Its unique formula, interpretation techniques, and ability to identify accumulation, distribution, tops, and bottoms make TSV a must-have tool for technical traders. By mastering TSV and leveraging its insights along with complementary indicators, traders gain a competitive edge in spotting trading opportunities and potential reversals.
