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Category: Raindrop Charts

Use Raindrops to Supercharge Your Favorite Indicators through Native Volume-Weighting

Raindrop Charts are a new type of financial chart that leverages volume data to render visualizations that demonstrate not just where price moved, but how volume was distributed along with this move. In order to facilitate this type of chart, arbitrary breakpoints such as open and close prices must be eliminated in favor of volume weighted average prices (VWAP). Each Raindrop consists of two sides, and each side represents one half of the trading period. The bar dashes on either side represent the VWAP for that half of the trading period.

Blue Raindrops: Potentially Effective for Identifying Support/Resistance & Reversals Levels

On Raindrop Charts, the color of a Raindrop depends on the relative position of the Left and Right mean (VWAP) prices to each other. The logic is similar to Japanese Candlesticks or Bars: It’s red if Right is less than Left, and green if Right is greater than Left.

Unlike other charts, there is a particular special case worth noting in Raindrop Charts when the VWAP price of each side of the Raindrop happen to be equal (or approximately equal; see more below).

We call this type of Raindrop a Blue Doji Raindrop:

Blue raindrop.

As I mentioned, we believe this Raindrop is very special.