For a bronco rider, the point is to not get off too early. Investors want to ride a trend as long as possible. Because of counter-trend retracements, the ride is never in a straight line. To capture as much of the trend as possible, an investor must not act prematurely during retracements.
Volume tends to expand in the direction of a trend and contract in a retracement. If investors change directions during retracements, they lose the benefits of riding the full trend. VolumeTrend™ distinguishes trends from adjustments, using sophisticated Hurst technology.
How it works
The positive-feedback loop responsible for trend persistence requires that more investors buy as price rises (or sell as price declines). Volume increasing on days (bars) when price is following the trend is a good confirmation of our feedback hypothesis. Likewise, if price moves on decreasing volume, then the move is suspect. Our VolumeTrend indicator ignores price movement when volume is decreasing or when price is not trend persistent, so as to emphasize the true trend.
These pictures show price and the corresponding VolumeTrend graph. Note the price retracements were not matched by swings in VolumeTrend. This makes it easier to stay in a trend.
VolumeTrend Bar Color: Green means that the Hurst-based trend is upward and volume is increasing. Red means that the Hurst-based trend is downward and volume is increasing. Gray means either that the Hurst-based trend is not trending or that volume is decreasing.