Many indicators, such as Simple Moving Averages, Exponential Moving Averages, Bollinger Bands, etc. can be plotted on the Raindrops chart, but before doing so it is important to understand the context of how it works. Raindrops do not have open or close prices like traditional candles. They have different data points and as such, use those data points to calculate indicators. This is a unique distinction in the TrendSpider platform vs most other charting tools.
Most tools calculate indicators off OHLC traditional candles, no matter what kind of chart is used. TrendSpider always calculates indicators from the exact chart type that is displayed under them, so in the case of Raindrops, the inputs are as follows:
- The high
- The low
- The right volume-weighted average price (indicating the volume-weighted average price for the first half of the period)
- The left volume-weighted average price (indicating the volume-weighted average price of the second half of the period)
More than that, the Raindrops chart also supports building trend lines to add the volume factor. In this documentation, we will explore:
- "Volume Weighting" Effects on Indicators
- "Volume Weighting" Effects on Trendlines
Let’s get started 🚀
The Volume Weighting Effects on Indicators
Using one of the following variables to calculate your indicators automatically volume weights them when on Raindrop charts: the right VWAP, the left VWAP, or the average of the left and right VWAP (OC2). This effectively converts any indicator into a volume-weighted indicator. Instead of only reflecting price movement, they can also incorporate volume data.
Let’s understand this with the help of an example. In the snippet below, you can view the two-chart layout on the screen where the upper chart is a Raindrop chart with a Simple Moving Average indicator (in red) and the lower chart is a Candle chart with also an SMA indicator (in red).
In both these charts, you will observe a difference in the indicator’s reading. For the upper chart (Raindrops), the reading for the SMA is 288.01 whereas the reading for the SMA in the lower chart (Candles) is 287.57. This variation exists because, in addition to the price, the trading volume has also been incorporated into the Raindrop chart.
The regular chart is using the Close/Right price source whereas, in the Raindrops chart, the Right VWAP (Volume Weighted Average Price) is in use. TrendSpider considers the Close/Right price source in the Raindrops chart as Right VWAP. Hence, the variation in the indicator reading exists.
“Volume Weighting” Effects on Auto Trendlines
Instead of drawing from the highs or lows, you can add volume to the trendline equation and draw it using the right or left VWAPs. In the example below, an automated trendline is plotted on the Raindrop chart with the Drawing Input set as Body (O/C) under the Trendline Analysis Preferences.