Optimizing the Tick Volume Indicator

The Tick Volume Indicator (TVI) was invented by William Blau and is described in his 1996 book Momentum, Direction and Divergence, thus:

"Let us devise an indicator for daytrading that separates the upticks and downticks in each price bar interval. [...] Let us define DEMA (upticks,r,s) as the double (EMA) smoothing of the upticks. By this we first perform an exponential moving average of the upticks for the r-bars; the result of the first smoothing is then exponentially smoothed for s-bars. Similarly, we define DEMA (downticks,r,s) as the double (EMA) smoothing of downticks.

We then define the Tick Volume Indicator (TVI) as:

DEMA (upticks,r,s) - DEMA (downticks,r,s)

TVI(r,s) = 100 ______________________________________

DEMA (upticks,r,s) + DEMA (downticks,r,s)

which has a range from -100 to +100. (Note: An alternate version that produces similar results may be made by taking the double EMA of the difference between the upticks and downticks in the numerator with the double EMA of the sum in the denominator.) [...]"

I have no idea what any of this means, but have opened the indicator in MQL Editor and find it is the shortest piece of coding for an indicator (and therefore apparently the simplest) I have ever seen. This is not to say I've seen many. The inclusive explanation can be found here: Google Books, in Chapter 4.

I first ran accross the TVI in Lou G's thread ALF/TVI, simple, effective daytrading, but believe it's standard equipment under Custom Indicators in most MT4 platforms.

It's not a perfect indicator, that is, it's got to have the wind in it's sails so to say, but If you get it adjusted right in a trending market, the TVI, especially when it's combinded with the TVI_2color, is a great indicator. It works even better if you have the two TVI's (plain and 2color) combined in one window. It is actually predictive in some instances - I don't understand why - and not because it's maxed-out and "exhibiting divergence". (Not that I understand the technical aspects of this, and correct me if I'm wrong but anyone who believes that a diverging indicator is telling them something useful is gullible and probably in for some unpleasant surprises. I lost some money about 5 years ago when it just kept on diverging and diverging... and the clickbank product I was experimenting with at the time gave assurances - over the phone no less - that the "triple divergence" was the best of all, especially if it's on a long timeframe... (It was, and it was a doosey.) ...though "calling tops & bottoms" is probably for another thread.) In any case the TVI, and the TVI _2color, when combined, are not especially prone to manifestations of divergence, and certainly not when compared to certain very widely used indicators.

As you can readily see from my profile I am not one for riding herd on threads (though some of my old news comments did get erased when the system got changed: most, luckily, saved by the author at the last minute for future reference) so this may be the last entry I make, thread-wise. But figured it might be a good idea to give a few examples with settings for the indicator(s) - or some templates. Then, if anyone wants to contribute, we could have a record of what works, and hopefully not what doesn't, with this indicator:

As a for instance, let me call your attention to the below chart:

Here we have a typical Monday "lift-off" of the GBPJPY, predictively signalled by the TVI and TVI_2color on the 30-min. chart. (The predictivity is in confirming that it's a trade you can take.) The dotted Medium Violet Blue line is "0" for the 2color; the solid Silver line is same for the regular TVI. A good signal is when the color changes within a few hours of the regular TVI crossing its 0-line, preferably before, and given always the prerequisite of having more or less pleasant swinging market conditions. Other repeating charateristics of the two interacting indicators are a good gauge and should be considered within the context of the above but are not as reliable, especially if you don't stick pretty much to one gradation of magnification/zoom, otherwise the floating 0-lines will make the two indicator lines cross at different places. And while the crossing of these lines (one of the other repeating characteristics refered to) can be seen as an early (or late, ending) signal, not seeing them at the same magnification all the time will make it confusing. (The floating 0-lines can be remedied by setting fixed maximums and minimums on the common tabs of the two indicators, to get a common 0-line, but this presents other problems and the indicators look better this way.) The TVI is set to 12, 12 and 5, the default, and the TVI_2color is set to 20, 20 and 30.

It is best to optimize the indicators as to length for every currency/timeframe combination. Another way to optimize would be to take into consideration the maximum divergence from "0" for each indicator, listed on the right side of the indicator window, though I can't figure out what period it's the maximum divergence of. It is also possible to hover the cursor along both TVI's and get a divergence reading at any point. (I didn't get heavily into analyzing divergence-from-zero figures.)
The 30-min. GBPJPY signal worked with some regularity pre-earthquake/tsunami, and has pretty much recovered. There are actually three TVI's here: 2Color, regular and Histogram, which has an auditory signal coinciding with the color change. (The window for the Histogram is compressed under the indicator window.) Have endeavored to install an Alert signal in the TVI_2color but that ain't my bailiwick and mt4 can't open the file.

Whereas every indicator requires optimization vis-a-vis both currency pair and timeframe to a certain extent, TVI is particularly fussy in this respect, and particularly time consuming because it's almost infinitely variable. Then there's divergence from the zero line, which adds, probably, a really quantitative way of measuring it. Anybody got a good idea on how one might go about doing this in a systematic way? Keeping in mind of course the (unteligible to me)basics of how the indicator functions as outlined in the first post?

Here's a setup that works well with a 5-minute chart. The TVI_2color is set smooth and slow making false signals comparatively rare, and you could do worse than just entering every time the Alert rings. (It has a one-bar delay.) The regular TVI is set to default: 12, 12 and 5. The 2color and Histogram are set at 100, 100 and 150. The #4X 3 Semafor Alert is also set extremely long: Using two of three iterations of the Semafor included in the #4X 3 version, one is set to 100, the other, 1000 - in the interest of avoiding "repainting" which is often complained of with regard to Semafor. Will include a template and list of indicators in the chart.

For a week like this with the GY you might want to try the most extreme settings, if at all. The 5-min. chart is fully compressed. The locked version of the template avoids the "0" lines being all over the place.

One thing that would be very useful would be to have a version of TVI - perhaps "TVI.0 Alert" - that gives an auditory signal when the 0-line is crossed. Have looked around at several TVI's and don't believe there is any with a signal on the zero line, only at the color change, which is probably something Mr. Blau never envisioned. The crossing of the zero line at certain settings is like a guarantee, more or less, that you're going in the right direction.

Here are the indicators not included in MT4, and other templates, as my use of TVI now stands. There was a four-hour one, but can't remember that right now. Am keen to describe the manifold advantages of Hanover's brilliant news indicator which I have used for some years, but it is in the process - like a lot of his indicators & MT4 software - of going commercial at this point, so will have to direct you elsewhere for that.

The rash of "absolutely" templates came about as a result of needing something that begins with "a". I leave to your discression what configurations to use for "absolutely banned" and "absolutely not".

Now I must eat crow because one of the templates posted above (Aboslutely Alert) has an indicator that is not posted - and this indicator is a divergence based indicator that works, contrary to my above assertions. (Still I wouldn't base my trading on divergence of the usual indicators, or any indicator, in a long timeframe.) The name of the mystery indicator is Trix4Kids, and it plots colored divergence lines on the chart against like-timed lines in the indicator window. According to the coder, it's intended to be used on a 15-min. timeframe, and I haven't done too very much experimentation with it. As far as I can tell, the coder has taken this indicator from a certain series of threads with "THV System" in the title, and this is much to our benefit because the people who ran those threads (some regular posters pretended not to be involved) were on the take: each iteration of the thread came with a big brand-new buggy download that had to be installed in order to get the indicators, and in turn caused MT4 to have to be UN-installed - or for you to get help from one of the "helpful" thread participants - so I wouldn't bother with that except to read about how they say the indicator is used. Trix4Kids is probably a version of either Stochastic or MACD divergence indicators available in FF & elsewhere, though have not been able to assertain this with certainty.

Finally: Have been able to code an auditory alert of zero-line crossing in the TVI indicator thanks to Hanover's thread explaining how, and the result is posted below.

Ohh! And also "BBands Stop" is another excellent indicator I forgot to post for the Absolutely Alert template. It's very fast and smooth. Experiment with settings. (20 and 20 is good on the 1m GBPJPY. 25 and 10 works on hourly & 15m of various pairs.)

I loved what you did with the TVI/TV2 color and also your explanation on it, thanks!