The VRSI indicator is another in the suite of volume indicators we have developed and one that complements our volume price analysis methodology perfectly. and was developed out of a desire to build further on our cornerstone of VPA by peeling back the layers of volume and considering the relative aspect of volume. Hence, the acronym of Volume Relative Strength Index indicator encapsulates what the indicator is all about.
By analyzing relative volume, we are able to see a visual representation of the pressure in a trend, or indeed the lack of pressure, and in doing so, present in a clear, intuitive, and colorful way whether the trend we are trading or considering joining is being driven with constant or rising pressure as it develops. If so, the indicator gives us that all-important ingredient: confidence—namely, the confidence to continue maintaining the position for as long as possible. However, equally important is when we see a trend that is tiring, with falling pressure, sending a strong signal it is time to close out. Alternatively, when there is little or no pressure in the trend, this is a signal to wait and be patient.
These signals are delivered in a variety of ways, primarily through a color change sequence of brighter or darker colors, but equally importantly, based on the height of each pressure bar and its relationship to its neighbor or groups of bars. And herein lies the close relationship to the volume price analysis methodology since the interpretation of both is about judging bars against one in terms of confirmation of trends, such as rising volume and rising pressure bars, or alternatively falling volume and falling pressure bars signaling that the trend is weakening.
The Volume Relative Strength Index indicator, or VRSI, embodies the core concept of volume-price analysis. It blends trading volume data with price to create an indicator for all the various markets and instruments, whether stocks, ETFs, futures, forex, or cryptocurrencies. The result is an intuitive visual representation of the market’s underlying bullish and bearish pressure in the form of an oscillating histogram with varying colors, with the central fulcrum at zero giving a clear indication when sentiment is shifting from bullish to bearish, or vice versa.
Now, for the first time, you can see the strength of the trend represented visually and clearly based on our two leading indicators of relative volume and price, giving you that essential ingredient we all seek: confidence. And just as with all our other indicators, we urge you to use it in multiple timeframes.
The histogram oscillates around the zero level at varying degrees as indicated by each bar’s length.
- A bar ABOVE zero is a bullish signal and can be categorized into 2 types:
- Strong bullish sentiment – This is characterized by a long upward bar that succeeds a shorter bar or group of bars.
- Weak/diminishing bullish sentiment – This is characterized by a short upward bar that succeeds a longer bar or group of bars.
- A bar BELOW zero is a bearish signal and can also be categorized into 2 types:
- Strong bearish sentiment – This is characterized by a long downward bar that succeeds a shorter bar or group of bars.
Weak/diminishing bearish sentiment – This is characterized by a short downward bar that succeeds a longer bar or group of bars
There are FOUR types of bars in total and they are easily distinguishable by their varying colors which can be customized in the indicator properties window. The current sentiment, whether it is bullish or bearish pressure, is strong when the bar moves further away from zero while it appears to diminish or weaken when the bar shortens and moves back towards zero. The length of the bar represents the amount of pressure towards the current sentiment which is largely influenced by trading volume. When the VRSI crosses zero either from negative to positive or vice versa, this signifies a potential trend reversal. Sometimes, it can also mean a pause before a continuation of an existing trend.
Applying the Indicator
Open your MT4 platform and in the main menu, select View > Navigator to open the Navigator window which appears at the left hand side of your workspace.
In the Navigator window, expand the Indicators tree by clicking the “+” symbol. Find the Quantum section and expand it by clicking the “+” once again to reveal the full list of Quantum Trading indicators.
To start using the indicator, you can click and drag QuantumVRSI from the Navigator to a chart or you can also double-click QuantumVRSI (which will then be applied to the currently selected chart). Doing either one of these will display the Custom Indicator window where you can configure all the various user settings for your indicator. These options are grouped and can be accessed by selecting the tabs. Once you are done customizing the indicator’s options, click OK to run the indicator.
Configuring the Indicator
Let’s focus on the Inputs tab and explore the different options available to configure the VRSI indicator:
Account Email
When running the Quantum VRSI for the first time in your trading account, you need to enter the email you used to purchase the indicator as part of its initial process. You only need to do this once as the email is stored in the terminal’s global variable cache after it is entered. Please make sure that you enter your email address correctly and exactly without any extra spaces before and after it. If you made an error, simply fill this field again to update it.
Look Back
Default value: 14 bars. This setting determines the look back period or the number of bars the indicator takes in to calculate the VRSI.
Strong Bullish Sentiment Color
Sets the color of the VRSI when a strong bullish signal is detected.
Weak Bullish Sentiment Color
Sets the color of the VRSI when a weak bullish signal is detected.
Strong Bearish Sentiment Color
Sets the color of the VRSI when a strong bearish signal is detected.
Weak Bearish Sentiment Color
Sets the color of the VRSI when a weak bearish signal is detected.
Send Alert on Strong Bullish Bar
Activate to allow the indicator to send alerts when a new strong bullish bar is detected.
Send Alert on Weak Bullish Bar
Activate to allow the indicator to send alerts when a new weak bullish bar is detected.
Send Alert on Strong Bearish Bar
Activate to allow the indicator to send alerts when a new strong bearish bar is detected.
Send Alert on Weak Bearish Bar
Activate to allow the indicator to send alerts when a new weak bearish bar is detected.
Send Alert on Cross Over Zero
Activate to allow the indicator to send alerts when VRSI value changes from negative to positive.
Send Alert on Cross Under Zero
Activate to allow the indicator to send alerts when VRSI value changes from positive to negative.
Send Notifications
Activate to allow the indicator to relay its alerts to your mobile device through push notifications. You can learn more about MT4’s push notification feature and how to set it up in the following link:
https://www.metatrader4.com/en/trading-platform/help/setup/settings_notifications
Send Emails
Activate to allow the indicator to relay its alerts to your email’s inbox. You can learn more about MT4’s email notification feature and how to set it up in the following link:
https://www.metatrader4.com/en/trading-platform/help/setup/setup_email
Removing the Indicator from the Chart
Open the chart’s Indicator List window by pressing Ctrl+I. You can also right-click the chart and select Indicator List from the context menu.
Select QuantumVRSI and click the Delete button then click the Close button.
