Use Volumetric Bars to Track Buyers & Sellers & See Order Flow Imbalance
Volumetric bars equip traders with a detailed “x-ray” view into the aggressive buying and selling activity of each price bar. Included with NinjaTrader’s Order Flow + suite of premium features, volumetric bars provide a tick by tick footprint style visualization which can help identify order flow imbalance.
Why Use Volumetric Bars?
Volumetric bars calculate the delta, or difference, between buying and selling volume. Traders use this insight to help determine whether buyers or sellers are more aggressive at each price level. In essence, this footprint style visualization can help interpret who won or lost the auction within a particular period of time.
While not considered an indicator, volumetric bars do provide additional insight into the order flow. By differentiating the buying vs. selling activity within each price bar, traders can identify the aggressive buyers and sellers in the market as well as significant price levels based on the price and volume action.
In the chart above, the Volumetric Bar type has been applied at a 5-minute time interval. Each volumetric bar consists of a candle with two columns to the right. The visual components of volumetric bars include:
- Individual Order Flow + Volumetric Bar
- Sell Volume column — Volume at each price level seen in the bar
- Buy Volume column — Volume at each price level seen in the bar
- Open/Close of bar
- Highlighted price — Shows the price(s) with the highest volume or delta within the bar
- Bar statistics panel — Shows important values for each Volumetric bar in a static grid-like fashion
How to Use Volumetric Bars: Follow the Colors
Volumetric bars tell a story of what happened during a specific time frame. While it may seem like an overwhelming visual display, the color shading serves as a filter for your eyes to help identify the most significant price and volume levels.
By design, volumetric bars are shaded based on the difference, or delta, in how much trading occurred at the Ask price (aggressive buys) versus the Bid price (aggressive sells). The higher the delta, the more apparent the shading will be within each cell. As a result, your eyes should be drawn to the most significant areas of the chart in terms of order flow.
Each session will have “Max” color shade and a “Min” color shade and each bar will display a yellow highlighted price indicating the highest delta seen within the bar.
The bar statistics are also shaded in such a way to draw your attention to the areas where the most aggressive action took place.
The chart above shows two days of trading with the most significant order flow trading activity taking place towards the end of the session each day. The bright color shading within the bars indicates the areas where the most aggressive buying and selling took place which is confirmed by the bar statistics below.
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