Equivolume Definition & Chart Examples
Equivolume Charts Definition
Equivolume charts display the relationship between price and volume in a bar. The top of the bar is the high of the session and the bottom of the bar is the low of the session. Equivolume charts differ from other price bars in that the width of the bar is determined by the volume on the session. The larger the volume, the wider the bar. Equivolume chart patterns are discussed in great detail in Richard W. Arms, Jr. book "Profits in Volume".
Trading with Equivolume Bars
Traders should look for wider and taller equivolume bars as price approaches key support and resistance levels. These large tower type bars imply that there is enough force to push the security through key levels.
Types of Equivolume Bars
There are a four main types of equivolume bars: (1) narrow, (2) square, (3) oversquare, and (4) power.
Narrow Equivolume Bar
A narrow equivolume bar implies that there is little volume supporting the move. Traders should treat breakouts as suspect when they approach key levels with a narrow bar.
Square Equivolume Bar
A square equivolume bar implies that there is decent volume on the session, but the security is having some difficulty continuing in the direction of the primary trend.
Oversquare Equivolume Bar
The oversquare has a wide base and very little height. This implies that there is a tremendous battle between bulls and bears at a given price level.
Power Equivolume Bar
The power bar is a tall wide bar. Traders will want to see a power bar at key breakout levels as confirmation that the move has legs.