Volume Oscillator

The volume oscillator asks whether recent volume is running above or below its own longer average. It is a moving-average crossover applied to volume. Positive readings mean the short window is more active than the long window. It has no price in the formula. A positive oscillator says activity is expanding. It does not say the expansion is bullish. You read the sign of the price move separately and then combine them in your head, carefully.

A spike in the oscillator flags a cluster of active bars, not one print, because a moving average is doing the looking. That is useful after the fact and a little late in the bar. The zero cross is "this market just got busier than it has been." In a breakout that is confirmation. In a range it may be the day you should have stood aside because both sides are active and the level has not broken.

Use the oscillator as a filter on setups you already have. Prefer breakouts when the oscillator is turning positive, meaning participation is arriving. Be sceptical of a price trend that continues while the oscillator makes lower peaks, meaning each push is quieter. Keep the lengths fixed. A 3/10 oscillator will be positive every time a slightly busy bar prints.

Buying because the volume oscillator crossed above zero. You bought activity, which may be a sell program. Also plotting it in points on a stock whose volume has tripled over the year. The percent form keeps the scale meaningful.

Two averages of a skewed series lag and smooth away the one bar that mattered. For a single-bar test, relative volume or a plain volume average is more direct. The oscillator is for the persistence of activity.