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Introduction to Intraday Intensity Index (III) Accumulation Distribution Oscillator
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Intraday Intensity Percent

Introduction to Intraday Intensity Percent

The Intraday Intensity Percent (IIP) is a technical analysis indicator designed to measure security’s buying and selling pressure during a specified period. Often referred to as the Money Flow Percent, it provides insight into the accumulation and distribution of a security by analyzing the relationship between price and volume. The IIP can help investors and traders identify potential reversals and confirm the strength of price trends.

Intraday Intensity Percent

Calculation of Intraday Intensity Percent

Key Components

The Intraday Intensity Percent is calculated using the following formula:

Intraday Intensity% = Intraday Intensity / Sum(Volume, x) * 100%

Where:

Intraday Intensity = (2 * Close - High - Low) / (High - Low) * Volume

x = period of sum, by default = 21

The Intraday Intensity component measures the buying and selling pressure by comparing the closing price to the day’s high and low prices while considering the trading volume. The result is then divided by the sum of the trading volume over a specified period (default 21 days) and multiplied by 100 to express it as a percentage.

Applications of Intraday Intensity Percent

Identifying Market Sentiment

Traders can use The IIP to gauge the overall market sentiment during a specific period. A positive IIP value indicates that buying pressure dominates the market, while a negative value signals selling pressure. Monitoring the IIP can help traders identify shifts in sentiment and potential trend reversals.

The IIP can be utilized to confirm the strength of an ongoing price trend. If the price of a security rises and the IIP is consistently positive, it suggests that the uptrend is supported by intense buying pressure. Conversely, a falling price accompanied by a consistently negative IIP indicates that the downtrend is driven by selling pressure.

Detecting Divergences

Traders can use the IIP to identify divergences between price action and the indicator. Suppose the price of a security reaches a new high, but the IIP fails to reach a corresponding high. In that case, it may indicate a weakening of buying pressure and signal a potential reversal. Similarly, if the price reaches a new low while the IIP fails to reach a corresponding low, it could suggest diminishing selling pressure and foreshadow a possible trend reversal.

Example scanners and strategies that use Intraday Intensity Percent

The Intraday Intensity Percent (IIP) can be used in both Scanning the market and Testing Strategies. To see how exactly it can be used in these ways, we provide the following samples. The scanner searches the market for stocks using this indicator, and the strategy tests buying and selling rules built around this indicator.

"TS: II%" scanner by Kevin Shah
charts.trendspider.com
“TS: II%” scanner by Kevin Shah
"TS: II%" strategy by Kevin Shah
charts.trendspider.com
“TS: II%” strategy by Kevin Shah

Limitations of Intraday Intensity Percent

False Signals

As with any technical indicator, the IIP can generate false signals. For instance, the indicator may suggest intense buying pressure, yet the price may not increase. To minimize the risk of false signals, traders should use the IIP with other technical indicators and analysis techniques to validate their trading decisions.

Dependence on Volume Data

The accuracy of the Intraday Intensity Percent depends heavily on the reliability of volume data. Inaccurate or incomplete volume data can lead to misleading results, making traders need to ensure access to accurate and up-to-date volume information.

Combining with Other Indicators

To improve the effectiveness of the IIP, traders can combine it with other technical indicators, such as moving averages, Relative Strength Index (RSI), or Bollinger Bands. Using a combination of indicators, traders can gain a more comprehensive understanding of the market dynamics, reduce the risk of false signals, and make more informed trading decisions.

The bottom line

The Intraday Intensity Percent is a valuable technical analysis tool that helps traders and investors identify market sentiment, confirm price trends, and detect potential trend reversals. However, like any technical indicator, the IIP has its limitations and should be used with other analysis techniques to improve the accuracy of trading decisions. By understanding the principles behind the IIP and using it as part of a comprehensive trading strategy, investors can enhance their ability to navigate the financial markets and make more informed decisions.

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Introduction to Intraday Intensity Index (III) Accumulation Distribution Oscillator