This screenshot corresponds to the action of 29th of November 2017 for the ES in a 1597 ticks chart:
I’ve added 3 numbers, 1, 2 and 3. They are at key moments that would have been great to know that something was brewing and that a nice action was about to come.
Now let’s see the same picture but with XBP Price Bars indicator added:
The XBP Price Bars indicator paints the bars with the following colors and criteria:
- Red bars: Extremely high average volume
- Cyan bars: High average volume
- Orange bars: Low average volume
- Purple dots: High speed bars, which they closed with a higher than average speed
The use of tick charts is strongly recommended with this indicator, only with tick charts we can analyze differences in the number of contracts traded on each tick to then extract and average and highlight differences in the way that the indicator is doing it. Also tick charts allow us to analyze the time that it takes to each bar to close. In the shown 1597 ticks chart, each bar will be closed only after 1597 ticks have occurred. The time that they take is then analyzed to extract “high speed” bars which are closed above the average.
With time based charts, like 1 minute charts, the indicator works, except for the speed indicator which cannot be calculated as every bar takes exactly the same time to be closed. The volume data will then just compare the volume occurred in each bat against each other. It can have meaning as well, but the best meaning is on tick charts. If you want to read more about the benefits of using tick charts, please read this older post.
Seeing hidden action with XBP Price Bars
If we highlight the 3 important points we can see how XBP Price Bars gave us the leading clue that big volume was entering the market to make it move:
In 1, the red bar happens near th 50 level in XBP Volume Ratio and after a big spike. This could be interpreted as a bullish sign, but again, let’s remember that volume indicators are leading indicators and we need to wait for a trend indicator to signal the trend direction if is not very clear by the volume indicator, which this is the case.
In 2, the red bar happens at the very top of the XBP Volume Ratio oscillator view. The following price action coupled with the XBP Volume Ratio readings suggest a bearish divergence. The whole price action could be seen as a Pull-Back move and that the downtrend will continue as it does.
In 3, a very interesting, and I must say typical, action occurs. The trend ends with high-speed bars but not high volume bars. There you have the algos exiting “quietly” the positions trying to fool the tape readers that the trend will continue as no big volume orders are seen. But us we can see the action clearly with the series of bullish divergences in XBP Volume Ratio and the cluster of speed bars. Once the trend indicator flips to the bull side we know that the action is over.
Getting the XBP Price Bars
As with the XBP Volume Ratio, soon I will add an online buying option. But if you cannot wait for it you can email me for the different purchasing options. The price of the indicator for a life-time license is of USD 100, just 2 E-mini points 😉