What it is
Raw volume bars jump around a lot. The Volume Oscillator smooths them into two averages and shows only whether short-term activity is above or below its longer norm. That answers the practical question quickly: is this move happening on more activity than usual?
It says nothing about direction. On gold, index and forex CFDs it uses tick volume, which rises and falls with real trading activity.
How it is calculated
1. Take a 5 period moving average of volume. 2. Take a 20 period moving average of volume. 3. Volume Oscillator = (5 period average minus 20 period average) / 20 period average x 100. 4. Some platforms use simple averages and some exponential; the reading is similar either way.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| Fast | 5 | 1 to 100 | The short volume average. Lower reacts to bursts of activity sooner. |
| Slow | 20 | 2 to 300 | The long volume average that defines 'normal' activity. |
How to read it
How to trade it
- 1
Mark the opening range on US30, for example the high and low of the first 30 minutes after the New York open.
- 2
Wait for a 5 minute candle to close beyond the range with the Volume Oscillator above 0.
- 3
Enter on the close of that candle.
- 4
Stop back inside the range, for example 30 to 50 points on US30.
- 5
Target 2 times the stop, or the next key level such as the previous day high.
The breakout is cancelled if price closes back inside the range, or the oscillator drops below 0 within a few candles, showing the activity faded.
WickSpeak writes a plain-English reading of the Volume Oscillator on the live candle: what it is, whether the market is busier or quieter than usual right now, how to use that on the current move and what would prove it wrong. In Playbook, a condition can check when the oscillator crosses above or below a level you set, is above or below a level you set, is above or below its own average, or is rising or falling.
Best markets and timeframes
Best on 1 to 15 minute charts around session opens on US30, NAS100 and gold, where activity changes sharply. On higher timeframes it still works as a filter but changes slowly.
Common mistakes
- Reading it as bullish or bearish. It only measures activity.
- Comparing readings across sessions without context; quiet hours are always below 0.
- Trading a breakout because volume is high when the candle closed back inside the level.
Works well with
Questions traders ask
What is the Volume Oscillator?
It compares a short and a long average of volume and shows the gap as a percentage. Positive readings mean volume is above normal, negative readings below.
What are good Volume Oscillator settings?
5 and 20 are common defaults and suit intraday charts. 14 and 28 or 12 and 26 are used for slower readings.
How is the Volume Oscillator different from PVO?
They are nearly the same idea. PVO is the MACD version, using 12 and 26 EMAs and often a signal line. The Volume Oscillator usually uses shorter lengths and no signal line.
Does the Volume Oscillator show direction?
No. It rises with more activity whether price is going up or down, so pair it with a price signal for direction.