Hi everyone,
I want to send a little feedback related to the Volume indicator that bitcoinwisdom shows to us.
In my opinion, the way that it is showed to us is not the correct way. Volumen, as the word itself says, show us the QUANTITY of the trades, no matter if it is a seller volume or buyer volume. They show it in a vertical bar.
In the website you colored the vertical bars green or red depending if the price goes up or is going down.
Well the fact is that sometimes, if someone put a wall and in the opposite direction of the order book is cleared or partially cleared compared to the wall, could happen this:
- Price: 500$ (We will avoid fractions for the example)
- At 501$ we have a seller wall of, for example 1000 BTC as a limited order. Beyond this point there is only 1 dollar in every price quote from the orderbook ( 1$ - 501; 1$ - 502 and so on)
- From 500$ to 490$ we only have 1$ in every price quote, so, with a little volume of 10 dollars, we are cappable of moving the price down to 490.
- In the other hand, if we want to move the price beyond 501$ we have to buy first that 1000BTC buyer wall and from this point every dollar we spent in excess will rise the price 1 dollar.
So, attending to the volume indicator you are showing...
If we buy 75% of the buyer wall at 501 (750BTC - 375.750$) the price still stand in 500$. But if we sell now 10 dollars, the price will drop down to 490$.... The price candle/line will be red... but the volumen bar in the web will look red too and thats not correct because we had more buyer volume (750BTC - 375.750$ ) compared to the seller volume (10$) and in this case volume bar have to be green in spite of the price.
You always put the volume bars in the same color as the price candle/line of that time frame and thats not correct.
Is more accurate to put a homogeneous color or make it more accurate depending of the type of the volume of that timeframe because could be misunderstood.
We now can think if we only watch de volume bar that a panic sell is happening or vice versa when is not.
I'm not sure if I explained myself correctly and make the example as clear as I want to explain what is happening with the indicator.
English is not my native language (as you already get noticed)... if you need me to be more accurate of what I'm talking about, please tell me, I can make it with chart paintings too.
I tried stacked ask/bid volume when VWAP supported. but it had some issue and I didn't apply it.
The horizontall red/green candlestick cannot work well with horizontal red/green stacked bar.
In RGB monitor, Red bar and Green bar has 1/3 pixel offset, the stacked bar is not straight. so it have to add a border or change the color.
The volume looks too colorful.