What it means
On an ordinary bar chart, every period takes up the same horizontal space, and volume is shown separately as small bars along the bottom. Equivolume changes this by making the width of each box proportional to the volume traded in that period.
A day of heavy trading therefore appears as a wide box, and a quiet day appears as a narrow one. The method was developed by the market analyst Richard Arms, who is also known for the Arms Index.
His idea was that price and volume belong together, because a price move on heavy volume carries more weight than the same move on thin volume. The chart makes that visible without needing a second panel.
Traders read the shapes of the boxes. A tall, narrow box suggests a price move on light volume, which may lack conviction.
A short, wide box suggests heavy trading with little price movement, which may signal that buyers and sellers are battling over a price level and that a breakout could follow. Equivolume is mostly used as a visual aid alongside other tools such as trend lines, moving averages and support and resistance levels.
It does not predict anything by itself, and the patterns are open to interpretation. Two traders looking at the same chart can reach different conclusions.
A common variant is the candlevolume chart, which combines the candlestick format with variable widths. Charting software usually lets users switch between formats in a few clicks.
Anyone using these charts should test their ideas on past data before risking money, and should remember that volume data differs between exchanges and data providers.
In practice
Real-world examples.
Example
A day trader looks at a share that has risen 4% in one session. On an equivolume chart, the box is tall but very narrow, showing that volume was well below normal. She treats the rise with caution and waits for confirmation before buying. She sets a stop loss just below the day's low to limit her risk.
Example
A swing trader notices three consecutive wide, short boxes in a stock that has been stuck near $50. Heavy trading with little progress suggests a struggle between buyers and sellers. When the next box is tall and wide, he takes it as a sign that the price has broken out. He notes the breakout level and sets an alert in case the price falls back.
Example
An analyst at a small investment firm builds a weekly equivolume chart for an index fund. She uses it in a presentation to show how large volume spikes lined up with turning points. The partners find the visual easier to follow than a conventional chart with a separate volume panel. The firm later adds the chart type to its standard research template.
Case study
Seen in the real world.
Kestrel Trading is an illustrative, fictional proprietary desk that traded mid-sized technology shares. The team had a habit of buying whenever a share rose three days in a row, but results were mixed.
A junior analyst suggested adding equivolume charts to the daily review. She noticed that the profitable trades usually came after rises where the boxes were wide, meaning volume was high, while losing trades often followed narrow boxes that showed thin trading. She also pointed out that the same shape could appear before a fall, so direction still mattered.
In this illustrative story, the desk added a volume check to its entry rules and tested the idea on six months of past trades before using it with real money. The change did not remove losses, but the team felt it filtered out several weak signals, and they kept the chart as one tool among many.
Watch out
Common mistakes.
- Treating a wide box as bullish by itself, when heavy volume can accompany either buying or selling and needs to be read with the direction of price.
- Relying on equivolume patterns alone to make trades, when they work best alongside trends, support levels and sound risk limits.
- Comparing boxes from different instruments without adjusting, when normal volume levels differ widely between shares and markets.
Questions
People also ask.
Who created equivolume charting?
The method is credited to Richard Arms, the analyst who also devised the Arms Index, and it has been available in charting software for many years. It is now a standard option in most professional charting packages.
How is equivolume different from a normal volume bar chart?
A standard chart shows volume as separate bars below the price, while equivolume builds volume into the width of each price box.
Does equivolume work on any time frame?
It can be used on intraday, daily or weekly charts, although very short periods can be noisy and less reliable. Traders usually choose the period that matches how long they plan to hold a position.
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