Thoughts on EquiVolume Charts

Jun 21, 2007: 6:53 PM CST

I admit that I have not studied EquiVolume Charts extensively, so I wanted to give a brief overview and cite some relevent sources for further study.

What differentiates an EquiVolume Chart from a standard Candle or Bar chart is the fact that the volume data is factored into the shape of the ‘bar’ or box, such that days with high volume will have expansive (long width) boxes and days with low volume will be narrow (thin). The price height will be determined solely by the high and the low of the day, and does not take into account the close (as pure EquiVolume Chartists believe the ‘close’ is a mere trade in the day and is less important than the high or the low). These form the basic differences with any other method of standard charting.

We know that retracements in trends should occur on low volume and breakouts from consolidation should occur on high volume. This can be seen in standard volume histograms, but when the information is encoded with the price boxes/bars, sometimes this information will ‘pop-out’ at us for easier viewing. Sometimes EquiVolume Charts allow us to anticipate price swings and retracements better.

For a basic definition and examples of EquiVolume Charts, see this link from MarketScreen.

The ArmsInsider provides a bit more detail in its basic explanation.

This source from Incredible Charts provides open/close data to enhance standard EquiVolume Charts.

StockCharts.com provides a simple way to view EquiVolume Charts – simply select it in the “Type” box to pull up stocks in this new view.

cat-eqvol.jpg

aa-eqvol.jpg

These are just two examples I came across recently.  These charts can also be of assistance to find ‘bottoming’ patterns like a saucer and can even help identify head and shoulders patterns.

They will work just as well on weekly frames – I am showing daily charts above.

If you’ve never viewed one of these charts, it can help you to do so if you have a few spare moments.  Again, how we view and interpret data helps us with our edge and profitability in the market.  I don’t think many people use these types of charts and if they ‘speak to you,’ then they may be helpful in this regard.

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