The green bar indicates that the price movement is increasing and the volume is growing. More traders at this point are entering into the market and they are trading in the same direction as the price move which causes it to grow in strength.
This means that if you are looking to enter the trade in the direction of the move now can be a good time. Vice versa if you were looking to trade against the market direction you may want to hold off. This can also apply to open positions as if the indicator is showing movement against your open position this could be a good time to get out.
In the example, below we can see a double candle which indicates continuing price rises with higher volume which could be followed when trading with the trend.
A pink bar indicates a high volume with little price move caused by traders entering the market in both directions. What follows this can often be a strong move in either direction giving traders the chance to make a quick profit. Although this indicator can predict the strength, it cannot predict the direction of the following move.
The brown bar indicates that there is a weakening of momentum of the price move. This suggested that traders are losing interest in the current move or that the trend is coming to an end. When seeing this, traders should avoid entering into a position in the same direction as the trend. Many use this bar as an indicator for a market reversal and trade against the starting trend.
The below example shows the short term trend going down until you have a brown bar which is followed by a dramatic shift if trend. The bar is also much smaller than the others around it which can proceed a much more violent move which makes these great to trade.
The blue bar indicates that the strong move could be due to speculation and not an indication of a trend as it is short lived. This is not a bar that you would want to enter into a trade in the same direction as the move. The bar looks at the disconnect between price moves and the volume of trades it took to cause them. A trader may look to take advantage of illiquid markets by using volume to push around the market which causes them to be short lived.
This indicator is used to see the strengths and weaknesses of price movements. You can use this indicator to judge whether a trend is strong enough or there is a possibility of a price reversal which you would rather avoid. This is done by looking at the changes in the size of the price movements and how this compares to the volume if it is rising or falling.
The Meaning of the Different Coloured Bars
The indicator appears in a separate window below the chart and consists of a separate bar per candle. The candles are divided into four colours depending on the price movement and the volume. Below showing the different settings for this indicator.
Things to Consider
This indicator can be applied against multiple timeframes as well as in all market conditions.