Equivolume displays prices in a manner that emphasizes the relationship between price and
volume. Equivolume was developed by Richard W. Arms, Jr., and is further explained in his
book Volume Cycles in the Stock Market.
Instead of displaying volume as an "afterthought" on the lower margin of a chart,
Equivolume combines price and volume in a two-dimensional box. The top line of the box is
the high for the period and the bottom line is the low for the period. The width of the
box is the unique feature of Equivolume--it represents the volume for the period.
Figure 46 shows the components of an Equivolume box:
The bottom scale on an Equivolume chart is based on volume, rather than on dates. This
suggests that volume, rather than time, is the guiding influence of price change. To quote
Mr. Arms, "If the market wore a wristwatch, it would be divided into shares, not
Candlevolume charts are a unique hybrid of Equivolume and candlestick charts. Candlevolume
charts possess the shadows and body characteristics of
candlestick charts, plus the volume width attribute of
Equivolume charts. This combination gives you the unique ability to study candlestick
patterns in combination with their volume related movements.
The shape of each Equivolume box provides a picture of the supply and demand for the
security during a specific trading period. Short and wide boxes (heavy volume accompanied
with small changes in price) tend to occur at turning points, while tall and narrow boxes
(light volume accompanied with large changes in price) are more likely to occur in
Especially important are boxes which penetrate support or resistance levels, since
volume confirms penetrations. A "power box"
is one in which both height and width increase substantially. Power boxes provide
excellent confirmation to a breakout. A narrow box, due to light volume, puts the validity
of a breakout in question.
The following Equivolume chart shows Phillip Morris'
Note the price consolidation
from June to September with resistance around $51.50. The strong move above $51.50 in
October produced a power box validating the breakout.
The following is a Candlevolume chart of the
You can see that this hybrid chart is similar to a
candlestick chart, but the width of the bars vary based on