Basic Volume Bar Rule

We look at the bars of volume. If a bar is the highest or second-highest, or lowest or second-lowest, of the last X bars, it is often indicative of a change in short-term direction. Doesnt matter if a high volume or a low volume bar, or a run up in price or a run down in price. A high bar can signify the end of a run up or run down as can a low volume bar. For X I typically use 13, but X seems to be a function of variance in bar-to-bar volume. The more variance, the lower X should be and vice versa

How to use volume bars

It must be looked at with respect to price, providing a narrative High volume bars give you an indication of a change in short term direction anywhere from 0 to 2, 3 bars back. Low volume bars give you an indication of a change in direction either 0 or 1 bar back. Works on any tradable instrument, and any timeframe. (For futures, uses total volume of all contracts.) Do not worry about holidays, opening X minutes on intra-day charts, volume created by arbitrage or other programs none of it matters.

Big range day on a high volume bar If it closes in the lower / higher 1/3 rd (?) of range, you can look to be a buyer / seller at a lower / higher price the next bar(s)

High volume reversal bars Bars with high volume that go opposite the prevailing short-term trend, on the first or second bar following a high / low. Sometimes these are outside days, sometimes not, but they are usually very reliable.

Bull Horns and Bear Horns Two high volume bars with an intermediate (or two) bar(s) signifying a short term top or bottom.

Narrow range days on low volume or high volume

High volume breakouts Generally are Upside breakouts only. The first few bars differ from ordinary high volume days in that they are occurring on a chart breakout.