The Intraday Intensity Index Indicator measures volume according to the closure position within the variation between the minimum and maximum of the session.
David Bostian developed it; this indicator, when included in a daily graph, can be seen as providing different information on price trends compared to other indicators such as the On Balance Volume Indicator.
The Intraday Intensity Indicator seeks to solve the significant simplification brought about by the On Balance Volume Indicator in attributing volumes completely upwards or downwards according to the closing level compared to the previous closing.
David Bostian‘s indicator starts from an assumption: the preponderance of upward or downward forces will determine the position of the closure within the range between minimum and maximum.
It will then be determined:
- a predominance of bullish forces will push the closure towards maximum seating
- a predominance of downward forces pushing the closure towards the seating minima
- an interlocutory session, without particular imbalances, will tend to have closure in an intermediate area of the range.
The underlying assumption of the Intraday Intensity Indicator is correct, but it is also affected by a simplification: the course of a session can be influenced by different phases.
In which the upward and downward functions can alternately take over.
In a single daily bar, it is unknown which fronts the largest volumes are generated, while the closing level could result from the final movement achieved with lower volumes.
However, with the technical analysis of the Intraday Intensity Indicator, we are closer to reality than with the On Balance Volume Indicator.
Intraday Intensity Index Indicator calculation formula
The standard and standardized versions of the Intraday Intensity Index formula are as follows:
Where: C = Closing price; H = Maximum of the session; L = Minimum of the session; V = Volumes exchanged in the session.
This portion of the formula:
2 x C – H – L
achieves the purpose of identifying the closing level, purging it of the upper and lower limit determined by the maximum and minimum seating;
while the denominator portion:
serves to relate the closure within the variation between maximum and minimum. The result will then be multiplied by the volumes.
It will equal +1 when the closing is equal to the maximum and then add the volumes.
It will be -1 when the closing is equal to the minimum and then subtract the volumes.
It will be 0 when the close is in the middle of the range and will therefore disregard volumes.
Other nuances can also occur naturally:
- a 75% closure of the range will add 50% of the volumes
- a 25% closure of the range will subtract 50% of the volumes
we will then build the Intraday Intensity Index at 21 days or with a different time window depending on the needs of each analyst.
There is also the normalized version of this indicator, which is obtained by dividing it by the sum of volumes and then multiplying x 100; the result at this point will be an oscillator that assumes values between +100 and -100.
The formula for the standard 21-period indicator is:
IInorm = (IIstd / S21 V) x 100
In this case, it may be useful to display the normalized indicator as a histogram.
How to use the Intraday Intensity Index Indicator
The Intraday Intensity indicator is used to detect divergences:
- whether downward and upward prices are likely to reverse downward
- whether rising and falling prices are likely to reverse upwards
- if it agrees with the prices confirms the trend
The functioning of the differences in volumes is different from those examined on prices, for example, in the Momentum index, where we measured the rate of price rise or fall.
Differences in volumes are based on the fact that volumes also tend to decrease in the phases of trend exhaustion, confirming the low conviction.
Intraday Intensity Index Indicator for TradeStation and MultiCharts
Finally, we highlight the Intraday Intensity Indicator for TradeStation and the Intraday Intensity Indicator for MultiCharts.
Vars: Intraday_Intensity(0), Intraday_Intensity_Index(0); 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. Through using them, you can discover what knowledgeable financial professionals are doing.
We created the Intraday Intensity Indicator to overcome the limitations of other volumes indicators.
Unfortunately, the Intraday Intensity Indicator examines only the end-of-day volumes. We cannot determine from this indicator what intraday movement has been supported by high volume.
To sum up, we rarely use this indicator, and we never use it alone.
There are other volume-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: