DEFINITION of Equivolume
Equivolume is a technical chart that shows daily price ranges of a stock and and its trading volumes and plots them together as one piece of data. The height of each bar represents the high and low for each period and the width represents the volume relative to the total shares traded over the time period being analyzed.
BREAKING DOWN Equivolume
This type of chart is very similar to candlesticks except that volume is incorporated into the data point rather than added as an indicator on the side. The visual aid for volume combined with the high/low may be more useful for the technical analyst studying the chart. For instance, generally speaking, a wide bar is deemed to be more significant than a thin bar because large volume usually precedes a significant price move. Breakouts or breakdowns of share price action are often accompanied by higher trading volumes, and wider-than-average bars that appear on an Equivolume chart can provide a trader with a signal to take action.
No single technical chart is foolproof, of course, so a trader who uses an Equivolume chart should turn to other tools to help guide his or her trading. Also, the chart, unlike a candlestick, does not display open and close data points of the stock. The high and low points of a stock on a bar is critical information, but additional trend data that a technical analyst may want to see are where a stock price opens and closes. A stock that closes below its opening price for a day, whatever the height of the bar, yields a different clue to an analyst than the reverse situation in which a stock closes above its opening price. Taken over many periods, open/close data points can delineate a trend that may be unclear in just an Equivolume chart alone.