Relative Volume

Relative Volume indicator for NinjaTrader 8

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 volume, an increase will be seen during the European and US sessions. This is because the data in the lookback period for the European/US sessions are compared to the overnight session. Of course, the overnight session has comparatively light volume. Conversely, comparing the European and US sessions with the overnight will always show a fall-off in volatility.

Therefore, Relative Volume compares the average volume at a specific time of day, with the average volume of the past N days. Specifically, it compares:

  • Overnight volume with the overnight volume in the lookback period
  • European volume with the European volume in the lookback period
  • Regular session with the regular volume in the lookback period

The Relative Volume indicator furthermore allows you to compare the average volume 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 volume 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.

Using the Relative Volume Indicator

For ideas on how to use the indicator you may consider reviewing our posts on the TDI indicator or the Squeeze momentum setup. Furthermore, the Relative Volume indicator may be used in combination with Trend FiltersTrend Analysis and Momentum Oscillators such as the Adaptive LaguerreADXKnow Sure Thing or the Heikin Ashi candles for determining market trends. Support / resistance indicators are located the Session Tools category and we have a post on Fibonacci retracement levels.

The indicator is available for NinjaTrader 8 and was discussed in this blog post. For instruments that lack reliable volume information (FX/Crypto currencies), you may consider using the Relative Ranges indicator, which was discussed this post.