The Volume Oscillator is a powerful technical analysis tool that helps traders measure changes in market participation by comparing short-term and long-term volume trends. By analyzing volume momentum rather than price alone, the Volume Oscillator indicator provides early signals that can confirm trends, identify reversals, and improve trade timing across different financial markets.
In this guide, you will learn how the Volume Oscillator works, how to calculate it, the best volume oscillator settings, and how to apply effective volume oscillator strategies, including practical use on TradingView.
What Is the Volume Oscillator Indicator?
The volume oscillator indicator measures the difference between two moving averages of trading volume—one short-term and one long-term.
Its main purpose is to show whether volume is expanding or contracting relative to recent history.
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Rising values indicate increasing market participation
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Falling values suggest declining interest or weakening momentum
Because volume often changes before price, the Volume Oscillator is widely used to confirm trends and detect potential trend reversals.
How the Volume Oscillator Works
The Volume Oscillator compares:
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A shorter-period moving average of volume
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A longer-period moving average of volume
When the short-term volume average rises above the long-term average, the oscillator moves higher, signaling growing interest from traders.
When it drops below, it reflects decreasing participation and possible trend weakness.
Volume Oscillator Formula
Understanding the volume oscillator formula is essential for proper interpretation.
Volume Oscillator (Points)
Volume Oscillator = Short-Term Volume MA − Long-Term Volume MA
Volume Oscillator (Percentage)
Volume Oscillator (%) =
(Short-Term Volume MA − Long-Term Volume MA) ÷ Short-Term Volume MA
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Points show absolute volume differences
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Percentage values normalize the data for easier comparison across assets
Volume Oscillator Example Explained
Consider a chart using a 5-week and 10-week Volume Oscillator applied to a stock such as Xerox.
In a healthy market structure:
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Prices trend higher with rising linear regression trendlines
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The Volume Oscillator rises simultaneously, confirming bullish momentum
Likewise:
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Falling prices accompanied by a declining Volume Oscillator confirm bearish pressure
When price and volume move in the same direction, the trend is considered strong and reliable.
Volume Oscillator Strategy for Trading
An effective volume oscillator strategy focuses on confirmation and divergence.
Trend Confirmation Strategy
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Buy when price is rising and the Volume Oscillator is trending upward
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Sell when price is falling and the Volume Oscillator is trending downward
Divergence Strategy
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Bullish divergence: price makes lower lows while the Volume Oscillator makes higher lows
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Bearish divergence: price makes higher highs while the Volume Oscillator makes lower highs
These divergences often appear before price reversals.
Best Volume Oscillator Settings
The optimal volume oscillator settings depend on the trading timeframe:
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Short-term trading: 5 / 10 periods
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Swing trading: 14 / 28 periods
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Long-term analysis: 20 / 50 periods
There is no universal setting—traders should test multiple combinations based on asset volatility and trading style.
Volume Oscillator on TradingView
Using the volume oscillator TradingView tool is simple:
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Open TradingView
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Go to Indicators
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Search for “Volume Oscillator”
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Adjust periods and display type (points or percentage)
TradingView allows traders to combine the Volume Oscillator with trendlines, moving averages, and momentum indicators for deeper market analysis.
Advantages of the Volume Oscillator
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Confirms price trends with volume strength
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Identifies weakening momentum early
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Works across stocks, forex, indices, and commodities
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Simple calculation and interpretation
Limitations of the Volume Oscillator
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Not ideal as a standalone indicator
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Can produce false signals in low-volume markets
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Works best when combined with price action and trend analysis
Why Traders Use the Volume Oscillator
Professional traders rely on the Volume Oscillator because volume reflects real market commitment. When price moves without volume support, trends often fail. The Volume Oscillator helps traders avoid weak breakouts and focus on moves supported by genuine market participation.
Trade Smarter with LDN Global Markets
You can apply the Volume Oscillator indicator and advanced volume-based strategies through the LDN Global Markets trading platform, offering:
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Fast and transparent execution
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Advanced charting tools
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Multi-asset trading opportunities
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Professional market analysis and education
