Algorithmic Trading Tips & Tricks - Using UVOL & DVOL Difference Inside a Bollinger Channel to Trigger Entries

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So what is UVOL or DVOL? In NinjaTrader these ticker symbols represent the total volume of all tickers on NYSE that went up or down. There are also other ones that you can use for NASDAQ and other compilations depending on your data provider.

In this article, we will be reviewing NASDAQ and trading on NQ. The ^NUPV and ^NDNV ticker names is what you will need to look for in the NinjaTrader instrument list. The tickers themselves can be used as a pretty interesting filter. There are numerous concepts that you can come up with but in this article, I will be testing 2 main concepts.

In order to understand them here is the step by step guide of what I have done:

1) Take UVOL - DVOL to get the delta value

2) Make the delta value the input for a Bollinger channel

3) In the first case if delta is above/below the Bollinger we are going to assume that the market is overheated and will start moving in opposite direction

4) In the second case if the  if delta is above/below the Bollinger we are going to assume that the market is overheated and panic movement shall occur into the further direction ie. there are so many buyers or sellers that they will convince the market to move on further

In the example, I simply enter when the delta enters back into the Bollinger channel and exit at the end of the day. This is just a simple test to try and realize whether the concept is worth trying at all and I have to say it is. Obviously more tests and techniques will be required to build a proper trading algorithm around it but overall I think it is a worthwhile concept. 

You can also see that the inverse concept is also worthwhile paying attention to and it all really depends on the current market conditions.

I would say that the trick is to realize which one to use depends on the level of the delta. On the pic we can see that most of the time the delta is below 1000 for NQ and you might also realize that this is where the breakout version works better however when the delta is way overheated with very large volumes it might be best to use the other one.

Overall, I hope the article has provided you with some interesting ideas for building your trading systems. Subscribe for more info and let me know if you would like this indicator. Thank you.