What is Volume Oscillator?
The Volume Oscillator compares a fast and a slow exponential average of volume and shows the gap as a percentage of the slow one, as a line around a dashed zero line in its own pane. A reading of 30 means recent volume is running 30% above its baseline. Because it is a percentage, the same reading means the same thing on a major pair and a thin altcoin.
The Volume Oscillator shows whether trading activity is rising or falling. It says nothing about price direction: a surge of selling and a surge of buying both produce a high positive reading.
How to use Volume Oscillator
- Above zero. Short-term volume is above its baseline, so activity is picking up. Breakouts on rising volume are generally read as more convincing than breakouts on fading volume.
- Below zero. Short-term volume is below its baseline, so activity is drying up. A trend that continues while the oscillator stays negative is moving on thinning participation.
- Spikes. A sharp spike marks a burst of activity relative to the recent norm. Check the candles to see which side it came from.
- The two lengths. Shorter lengths react to single heavy bars; longer ones compare broader stretches of activity.
Read it together with price. On its own it shows activity, not direction.
Settings
| Setting | Default | What it changes |
|---|---|---|
| Short Length | 5 | Bars in the fast volume average. Lower reacts to single heavy bars sooner. Minimum 1. |
| Long Length | 10 | Bars in the slow volume average, the baseline. Higher compares against a longer stretch of activity. Minimum 1. |
Adjust both lengths in the indicator settings. Keep the short length below the long one, or the reading flips sign.
Calculation
Both averages are exponential moving averages of volume. The difference between them is divided by the slow one and scaled to a percentage:
fast = EMA(volume, 5)
slow = EMA(volume, 10)
Volume Oscillator = 100 * (fast - slow) / slowEach exponential average is started from the simple average of its first bars, so the line appears once the long length has been filled and settles from there. A dashed zero line is drawn for reference. If the slow average is zero, for example on a stretch with no trading at all, there is no value to draw.
Limitations
- It has no direction. Heavy selling and heavy buying both push it up, so it cannot tell you which side is in control.
- It lags. Both lines are averages of past volume, so the oscillator confirms changes in activity after they have started.
- Volume quality varies between exchanges. The reading is only as good as the volume the exchange reports for that market.
- The live candle moves. The current bar's volume keeps growing until it closes, so the live reading usually starts low and rises during the bar.
- It is not a strategy. On its own it carries no risk management, sizing or exit.
Frequently asked questions
The Volume Oscillator is the gap between a fast and a slow exponential average of volume, expressed as a percentage of the slow one. It shows whether recent trading activity is above or below its own baseline.
Above zero, recent volume is higher than its baseline; below zero, it is lower. Traders use it to judge whether a price move has rising participation behind it. Because it ignores direction, always check the candles to see whether the extra volume came on up or down bars.
Yes. The indicator declares two inputs: Short Length, default 5, and Long Length, default 10, both with a minimum of 1. Open the indicator's settings on the chart to change them.
Values on bars that have already closed are not revised. The current bar's reading moves while that candle is live, and usually rises during the bar as its volume builds. The averages need a starting point, so loading older history can shift values near the very start of the loaded range.
It is built from volume alone, with no reference to whether bars closed up or down. For a volume measure that is signed by direction, look at On Balance Volume or Chaikin Money Flow.
Use the Add to chart button at the top of this page. It opens BTC/USDT on Binance in the Altrady Charts terminal with the built-in Volume Oscillator already applied. On any other market, open the indicator picker on the chart and choose Volume Oscillator from the Volume group.