Time Segmented Volume Definition

What Is Time Segmented Volume?

Time segmented volume (TSV) is a technical analysis indicator developed by Worden Brothers Inc. that segments a stock's price and volume according to specific time intervals. The price and volume data is then compared to uncover periods of accumulation (buying) and distribution (selling).

Key Takeaways

  • Time segmented volume (TSV) is a technical analysis indicator that segments a stock's price and volume by intervals.
  • According to the developer, spotting discrepancies between the TSV and stock price is a good way to determine possible entry and exit points.
  • Investors may gather more data over a longer time frame for a more complete picture, but a long lag time might affect daily trading patterns.
  • While TSV is an indicator of money moving into and out of a stock, it's not a standalone price-gauging tool.

Understanding Time Segmented Volume

TSV is a leading indicator because its movement is based on both the stock's price fluctuation and volume. Ideal entry and exit points are commonly found as the stock moves across the baseline level. This indicator is similar to on-balance volume (OBV) because it measures the amount of money flowing in or out of a particular stock.

TSV is a proprietary technical indicator developed by Worden Brothers Inc., classified as an oscillator. It is calculated by comparing various time segments of both price and volume. TSV essentially measures the amount of money flowing in or out of a particular stock. The baseline represents the zero line.

When TSV crosses up through the zero line, it signals positive accumulation or buying pressure. This action is considered bullish. Conversely, when TSV crosses below the zero line, it indicates distribution or selling pressure, which typically precedes a move down in price.

According to Worden, an important thing to look for when interpreting TSV is a contradiction of trends between price and TSV. Look for positive or negative divergences between price and TSV in order to determine potential tops and bottoms.

Several consecutive divergences increase the reliability factor in trying to pinpoint price reversals. For instance, if a price has been making successively higher highs while TSV has been making successively lower highs, this would constitute a series of negative divergences. This would be an indication of a possible top.

You can calculate a TSV on a wide variety of moving averages. As you increase the value of the moving average the result is a smoothing effect. However, there is a trade-off. As you increase the length of the moving average, the indicator becomes less sensitive to daily fluctuations. As a result, the indicator will have a greater tendency to lag price.

One of the features of this indicator is the ability to calculate a moving average of another moving average. This addition has made TSV more effective and easier to use. Now you can calculate a moving average of an already smoothed TSV and use it much in the same way the MACD (moving average convergence divergence) indicator is used. Positive and negative TSV crossovers are one more thing to consider when trying to form an opinion on a particular stock or market index.

Time Segmented Volume Example

Let's say a technical trading firm is trading a commodity like oil futures. The firm has a percentage target they need to hit for their profits, but the price point where they open their position it doesn't necessarily matter.

Using the TSV indicator, the firm sets a purchase order that triggers when the indicator passes beyond the baseline, indicating the oil future might be oversold. The firm's software purchases the position, and it would be sold when the inverse of the oversold indicator is hit, or their profit percentage target is met.