DECIPHERING TREND WITH VOLUME
A trend directional system, shown in the middle window of Figure 5.9, may also be incorporated into the volume indicator. The lower window shows just the percentage plot of the volume indicator without the trend indicator. When the trend is weak, the color histogram of the volume plot is red, and it is blue when the trend is strong. A tall red histogram generally at the halfway point of the decline would indicate bearishness in the market, and a tall blue histogram would indicate bullishness.
The formula for computing an indicator combining volume and trend in TradeStation format is as follows:
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