VSI Indicator: Volume Strength

Introduction

TheVSI (Volume Strength Indicator) is a powerful tool that combinesRelative Strength Index (RSI) calculations with various volume-based metrics to provide a clearer picture of market momentum. Traditional RSI focuses solely on price movements, but VSI enhances this by integratingvolume strength, offering traders deeper insights into price action confirmation and potential reversals.

By incorporating different volume sources such asOn-Balance Volume (OBV), Accumulation/Distribution (ADL), Elder’s Force Index (EFI), and Price Volume Trend (PVT), the VSI indicator provides a multi-dimensional approach to identifying market strength and weakness.

How VSI Works

The VSI consists of two main components:

Price-based RSI: Measures the relative strength of price over a chosen period.
Volume-based RSI (customized): Instead of price, it applies RSI to one of the selected volume indicators.

Additionally, VSI features avolume histogram, which normalizes volume fluctuations and provides a visual representation of buying and selling pressure in the market.

Understanding VSI Components

1. RSI Calculation on Price

The first step in the VSI calculation is applying a standardRSI to the price data. This is done using a defaultlength of 13 periods, but can be adjusted based on user preference. The result is further smoothed using alinear regression filter for better signal clarity.

2. RSI on Volume-Based Metrics

VSI allows traders to choose different volume indicators as the base for the RSI calculation:

OBV (On-Balance Volume): Measures cumulative volume flow by adding volume on up days and subtracting volume on down days.
ADL (Accumulation/Distribution Line): Uses price and volume to assess buying or selling pressure.
EFI (Elder’s Force Index): Combines price change and volume to measure the strength of buyers and sellers.
PVT (Price Volume Trend): Similar to OBV but incorporates percentage price changes.

The selected volume-based data is then processed using an RSI calculation, with the samelength parameter as the price RSI. Like the price RSI, it issmoothed using a linear regression function.

3. Volume Histogram Calculation

The VSI also includes avolume histogram that helps visualize market activity. This histogram is calculated by:

Comparing current volume to theaverage volume over the same period.
Normalizing the volume fluctuations relative to the historical average.
Assigning colors based on volume strength and price direction.

Additionally, users can choose between:

Volume Oscillator: Compares short-term and long-term volume averages.
Simple Moving Average (SMA) of Volume: A smoother approach to tracking volume trends.

Trading with VSI: How to Interpret Signals

The VSI provides multiple ways to identifytrend strength, reversals, and divergences:

Overbought & Oversold Conditions:
- Above 75 → Overbought (potential selling pressure).
- Below 25 → Oversold (potential buying pressure).
Mid-Level Confirmation:
- 50 level → Acts as a neutral zone.
Divergences:
- IfPrice RSI andVolume RSI move in opposite directions, it may signal an upcoming trend reversal.
- Astrong volume RSI breakout with price stagnation could indicate hidden buying/selling pressure.

Configuring VSI in ProRealTime

VSI allows traders tocustomize parameters based on their trading style:

Parameter	Description	Default Value
`length`	RSI period length	13
`addRsiX`	Volume-based RSI source (1=OBV, 2=ADL, 3=EFI, 4=PVT)	1
`smooth`	Smoothing factor for RSI	2
`size`	Histogram scaling factor	10
`volComp`	Histogram type (1=Volume Oscillator, 0=SMA)	1

Adjusting these values helps traders fine-tune VSI to match different market conditions and asset volatility.

VSI Code in ProRealTime

//------------------------------------------------------////PRC_VSI Volume Strength//version = 0//21.02.2025//Iván González @ www.prorealcode.com//Sharing ProRealTime knowledge//------------------------------------------------------//// Input//------------------------------------------------------//length=13 // LengthaddRsiX=1 // Relative Strength of 1=On Balance Volume 2=Accumulation/Distribution 3=Elders Force index 4=Price Volume Trendsmooth=2 // Smooth RSIsize= 10 // Histogram sizevolComp=1 // Histogram companion 1=volume oscillator 0=Moving average//------------------------------------------------------//// RSI//------------------------------------------------------//myrsi=rsi[length](close)sRsi=LinearRegression[smooth](myrsi)if addRsiX=1 thenif close=close[1] thensrc=0elsif close>close[1] thensrc=volumeelsif close<close[1] thensrc=-volumeendifCumSrc=cumsum(src)rsix=rsi[length](CumSrc)elsif addRsiX=2 then // Accumulation/Distributionif close=high and close=low or high=low thensrc=0elsesrc=(2*close-low-high)/(high-low)*volumeendifCumsrc=cumsum(src)rsix=rsi[length](CumSrc)elsif addRsiX=3 then // Elders Force Indexsrc=average[length,1]((close-close[1])*volume)rsix=rsi[length](Src)elsif addRsiX=4 then // Price Volume Trendsrc=(close-close[1])/close[1]*volumeCumsrc=cumsum(src)rsix=rsi[length](CumSrc)endifsRsix=LinearRegression[smooth](rsix)//------------------------------------------------------//// Volume Histogram//------------------------------------------------------//vAvg=average[length](volume)rvAvg=average[length](volume*size/vAvg)B=volume*(close-low)/(high-low)/vAvg*sizeS=volume*(high-close)/(high-low)/vAvg*sizeif volComp thenvolx=(average[5,1](volume)-average[10,1](volume))/average[10,1](volume)*100elsevolx=rvAvgendif//------------------------------------------------------//// Plot//------------------------------------------------------//volHist=volume/vAvg*sizeif open>close thenif volume/vAvg*abs(size)>abs(rvAvg) thenr=239g=83b=80a=255elser=120g=123b=134a=25endifelseif volume/vAvg*abs(size)>abs(rvAvg) thenr=36g=166b=154a=255elser=120g=123b=134a=55endifendif//------------------------------------------------------////Overbougthdrawhline(75)coloured("red")style(dottedline3)drawhline(65)coloured("red")style(dottedline3)colorbetween(75,65,"red",40)// Middledrawhline(50)coloured("grey")style(dottedline3)//OverSolddrawhline(35)coloured("green")style(dottedline3)drawhline(25)coloured("green")style(dottedline3)colorbetween(35,25,"green",40)//------------------------------------------------------//return volHist coloured(r,g,b,a)style(histogram), volx coloured("orange"), srsi as "Relative Strength of price" coloured(142,21,153)style(line,2), srsix as "Relative Strength of Volume" coloured(0,188,212)style(line,2)

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//------------------------------------------------------//

//PRC_VSI Volume Strength

//version = 0

//21.02.2025

//Iván González @ www.prorealcode.com

//Sharing ProRealTime knowledge

//------------------------------------------------------//

// Input

//------------------------------------------------------//

length=13// Length

addRsiX=1// Relative Strength of 1=On Balance Volume 2=Accumulation/Distribution 3=Elders Force index 4=Price Volume Trend

smooth=2// Smooth RSI

size=10// Histogram size

volComp=1// Histogram companion 1=volume oscillator 0=Moving average

//------------------------------------------------------//

// RSI

//------------------------------------------------------//

myrsi=rsi[length](close)

sRsi=LinearRegression[smooth](myrsi)

ifaddRsiX=1then

ifclose=close[1]then

src=0

elsifclose>close[1]then

src=volume

elsifclose<close[1]then

src=-volume

endif

CumSrc=cumsum(src)

rsix=rsi[length](CumSrc)

elsifaddRsiX=2then// Accumulation/Distribution

ifclose=highandclose=loworhigh=lowthen

src=0

else

src=(2*close-low-high)/(high-low)*volume

endif

Cumsrc=cumsum(src)

rsix=rsi[length](CumSrc)

elsifaddRsiX=3then// Elders Force Index

src=average[length,1]((close-close[1])*volume)

rsix=rsi[length](Src)

elsifaddRsiX=4then// Price Volume Trend

src=(close-close[1])/close[1]*volume

Cumsrc=cumsum(src)

rsix=rsi[length](CumSrc)

endif

sRsix=LinearRegression[smooth](rsix)

//------------------------------------------------------//

// Volume Histogram

//------------------------------------------------------//

vAvg=average[length](volume)

rvAvg=average[length](volume*size/vAvg)

B=volume*(close-low)/(high-low)/vAvg*size

S=volume*(high-close)/(high-low)/vAvg*size

ifvolCompthen

volx=(average[5,1](volume)-average[10,1](volume))/average[10,1](volume)*100

else

volx=rvAvg

endif

//------------------------------------------------------//

// Plot

//------------------------------------------------------//

volHist=volume/vAvg*size

ifopen>closethen

ifvolume/vAvg*abs(size)>abs(rvAvg)then

r=239

g=83

b=80

a=255

else

r=120

g=123

b=134

a=25

endif

else

ifvolume/vAvg*abs(size)>abs(rvAvg)then

r=36

g=166

b=154

a=255

else

r=120

g=123

b=134

a=55

endif

//------------------------------------------------------//

//Overbougth

drawhline(75)coloured("red")style(dottedline3)

drawhline(65)coloured("red")style(dottedline3)

colorbetween(75,65,"red",40)

// Middle

drawhline(50)coloured("grey")style(dottedline3)

//OverSold

drawhline(35)coloured("green")style(dottedline3)

drawhline(25)coloured("green")style(dottedline3)

colorbetween(35,25,"green",40)

//------------------------------------------------------//

returnvolHistcoloured(r,g,b,a)style(histogram),volxcoloured("orange"),srsias"Relative Strength of price"coloured(142,21,153)style(line,2),srsixas"Relative Strength of Volume"coloured(0,188,212)style(line,2)

Conclusion & Best Practices

The VSI indicator is apowerful enhancement over traditional RSI, allowing traders to integratevolume dynamics into their analysis. By using VSI, traders can:

✅ Confirm RSI signals with volume strength.
✅ Identifydivergences that indicate hidden buying or selling pressure.
✅ Adjust settings to adapt to different market conditions.

To maximize its potential, VSI can be combined withtrend indicators like moving averages or Bollinger Bands to improve accuracy. Whether used fortrend-following or reversal trading, VSI providesa deeper, more complete view of market momentum.

Relative Strength Index RSI volume vsi

Risk disclosure:

No information on this site is investment advice or a solicitation to buy or sell any financial instrument.Past performance is not indicative of future results. Trading may expose you to risk of loss greater than your deposits and is only suitable for experienced investors who have sufficient financial means to bear such risk.

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