Today we are talking about the Intraday Intensity Indicator for TradeStation and MultiCharts.
This is a volume-based indicator developed by David Bostian. The Intraday Intensity is a ratio between volume and price daily close.
Firstly, this indicator is born to identify price changes caused by high volume.
You know that high volume generally hides institutional trades. When institutional drives the price, you can trust in the movement.
The formula to calculate this indicator is:
I I I = (High−Low)×Volume(Close×2)−High−Low
You can use Intraday Intensity to discover divergence between price and indicator.
In other words, you can use this indicator to find reversal points.
In addition, many traders use this indicator with Bollinger Bands.
When the price rises walking on the bands and the indicator rises, the uptrend is strong. When the price goes down walking on the bands and the indicator decreases, the downtrend is confirmed.
Similarly, other traders use this indicator to validate breakout near resistance and support trendlines.
This is the Intraday Intensity code for TradeStation and MultiCharts:
Intraday_Intensity = ( (Close * 2) – High – Low ) / ( ( High – Low ) * Volume );
Intraday_Intensity_Index = summation(Intraday_Intensity, 21);
Plot1 ( Intraday_Intensity_Index, “III”, White);
Generally, we like the volume based indicator. For example, we developed the Chaikin Money Flow in this article.
Volume indicators should give you a better perspective. You can discover what knowledgeable financial professionals are doing.
The Intraday Intensity was born to overcome the limitations of other volumes indicators.
Unfortunately, the Intraday Intensity examines only the end of day volumes. We don’t know what intraday movement has been supported by high volume.
To sum up, we use rarely this indicator and we never use it alone.
There are other volumes based indicators: VWAP, Positive and Negative Volume Indexes, On Balance Volume and Chaiken’s Money Flow.
You can learn more about this indicator, reading these resources: