Relative Volume

The Relative Ranges vs. Relative Volume

The Relative Volume indicator identifies high/low volume bars by comparing current volume against the average volume over the same period during the preceding n days/weeks.

Indicator Description

The Relative Volume indicator can be used to address changes in volatility between the overnight, European and US regular sessions.

If volume weighted average is used to analyze average volume, a steady increase will be seen during the European and US trading sessions. This is because the data included in the lookback period for the European and US sessions are compared to the overnight session. This session has comparatively little volume. Conversely, comparing the European and US sessions with the overnight will always show a fall-off in volatility.

The Relative Volume indicator solves this issue comparing the average volume at a specific time of day, with the average volatility of the past N days. Specifically, it compares the overnight volume with the overnight session, the volatility of the European session with the European session, and the regular session with the regular session.

The Relative Volume indicator furthermore allows you to compare the average volatility at a specific time and day of the week. Days and times that have regular news releases, for example weekly petroleum and natural gas reports, the volume is compared with the average volatility calculated for the same day/time of the week over the N preceding weeks.

Identify increasing / decreasing volatility can help in locate breakout and reversal patterns together with the Relative Ranges indicator. This information can be used to run breakout strategies when cumulated relative volume are above average and countertrend strategies when cumulated relative volume are low.

The indicator is available for NinjaTrader 8.