What is the Intraday Intensity Index
The Intraday Intensity Index is a volume based technical indicator that integrates volume with a security’s price. Traders can use the Intraday Intensity Index to follow how intraday highs and lows are moving with volume in comparison to the previous day’s closing price.
- The Intraday Intensity Index is used to track how volume is influencing a security's price.
- The index uses a security's most recent close, high and low in its calculation while also factoring in volume.
- For example, when intraday highs and lows move above the closing price with volume, then the index will move sharply negative.
- The Intraday Intensity Index is often used with other indicators to support trading plans around a security's resistance and support trendlines.
Calculating the Intraday Intensity Index
The Intraday Intensity Index was developed by Dave Bostian. It is one of several indicators that can be used to follow how volume is influencing a security’s price.
The Intraday Intensity Index provides a continuous volume focused indicator. It uses a security’s most recent close, high and low in its calculation while also factoring in volume.
The Index level is derived from the following calculation:
Intraday Intensity Index=(High−Low)×Volume(Close×2)−High−Lowwhere:Close=Most recent closing priceHigh=Intraday high priceLow=Intraday low priceVolume=Number of shares sold intraday
The numerator subtracts the security's high and low from two times the most recent closing price. The denominator multiples volume times the difference between the security's high and low trading price. Overall, the security's intraday highs and lows become important factors driving the index's value when they move above the closing price with increased volume.
Generally, in the index's calculation, when the intraday highs and lows move above the closing price with volume, then the index will move sharply toward negative territory. Thus, the Intraday Intensity Index can be helpful in identifying significant changes in price caused by volume. Since high volume is typically driven by institutional trades, it can also be considered a means for following how institutional investment is affecting price.
The Intraday Intensity Index is typically available through advanced charting software. It is usually followed in a chart window below a candlestick chart. Often it will also be an overlay against volume. Many traders use the Intraday Intensity Index in conjunction with Bollinger Bands or other envelope channels, since substantial movement in the Intraday Intensity Index can help to support trading plans around a security's resistance and support trendlines.
Other Volume Indicators
The Intraday Intensity Index is one of a few popular indicators for following volume's affect on price. Other popular indicators include the volume weighted average price (VWAP), the Positive Volume Index and Negative Volume Index, and Chaiken's Money Flow.
Chaiken's Money Flow
Chaiken’s Money Flow indicator uses the Intraday Intensity Index in its calculation. It follows the sum of the Intraday Intensity Index over a specified time period in comparison to the sum of volume. Its calculation is as follows:
Chaiken’s Money Flow=∑i=121Volumei∑i=121Intraday Intensity Indexiwhere:Numerator=Sum of 21 periods of Intraday Intensity IndexDenominator=Sum of 21 periods of total volume