Volume Cluster Support and Resistance Levels [QuantAlgo]

🟢 Overview

This indicator identifies statistically significant support and resistance levels through volume cluster analysis, isolating price zones characterized by elevated trading activity and institutional participation. By quantifying areas where volume concentration exceeded historical norms, it reveals price levels with demonstrated supply-demand imbalances that exhibit persistent influence on subsequent price action. The methodology is asset-agnostic and timeframe-independent, applicable across equities, cryptocurrencies, forex, and commodities from intraday to weekly intervals.

🟢 Key Features

1. Support and Resistance Levels

The indicator scans historical price data to identify bars where volume exceeds a user-defined threshold multiplier relative to the rolling average. For each qualifying bar, a representative price is calculated using the average of high, low, and close. Proximate price levels within a specified percentage range are then aggregated into discrete clusters using volume-weighted averaging, eliminating redundant signals. Clusters are ranked by cumulative volume to determine statistical significance. Finally, the indicator plots horizontal levels at each cluster price: support levels (green) below current price indicate zones where historical buying pressure exceeded selling pressure, while resistance levels (red) above current price mark zones where sellers historically dominated. These levels represent areas of established liquidity and price discovery, where institutional order flow previously concentrated.

The Touch Count (T) metric quantifies historical price interaction frequency, while Total Volume (TV) measures aggregate trading activity at each level, providing objective criteria for assessing level strength and trade execution decisions.

2. Volume Histogram

A histogram appears below the price chart, displaying relative volume for each bar within the lookback period, with bar height scaled to the maximum volume observed. Green bars represent up-periods (close > open) indicating buying pressure, while red bars show down-periods (close < open) indicating selling pressure. This visualization helps you confirm the validity of support/resistance levels by seeing where volume actually spiked, identify accumulation/distribution patterns, and validate breakouts by checking if they occur on above-average volume.

3. Built-in Alerts

Automated alerts trigger when price crosses below support levels or breaks above resistance levels, allowing you to monitor multiple assets without constant chart-watching.

4. Customizable Color Schemes

The indicator provides four preset color configurations (Classic, Aqua, Cosmic, Custom) optimized for visual clarity across different charting environments. Each scheme maintains consistent color mapping for support and resistance zones across both level lines and volume histogram components. The Custom configuration permits full color specification to accommodate individual charting setups, ensuring optimal visual contrast for extended analysis sessions.

• Classic:
  

• Aqua:
  

• Cosmic:
  

• Custom:
  

🟢 Pro Tips

→ Trade entry optimization: Execute long positions at support levels with high touch counts or upon confirmed resistance breakouts accompanied by above-average volume

→ Risk parameter definition: Position stop-loss orders near identified support/resistance zones with statistical significance to minimize premature exits

→ Breakout validation: Require volume confirmation exceeding historical average when price penetrates resistance to filter false breakouts

→ Level strength assessment: Prioritize levels with higher touch counts and total volume metrics for enhanced probability trade setups

→ Multi-timeframe confluence: Synthesize support/resistance levels across multiple timeframes to identify high-conviction zones where daily support aligns with 4-hour resistance structures