It’s all Relative Volume

Relative Volume indicator for NinjaTrader 8

In this month’s Indicator Spotlight, we’re looking at the Relative Volume indicator for NinjaTrader 8. The indicator can be used to address volume changes between the overnight, European and US regular sessions. Watch the video or continue reading below to learn more:

The Volume Weighted Average

If a volume weighted average is used during the European session, you will often see a lot of “false” volume spikes. The reason is that it compares the volume with the overnight session, which is comparatively light on volume. A similar issue can be seen if you run a volume weighted average, Bollinger or Standard Deviation Bands during the U.S. regular session. Volume spikes are often missed because the lookback period compares with the regular open. Of course, the regular open frequently has the highest volume during the session.

Volume Weighted Average for NT8

Relative Volume for NinjaTrader 8

This issue can be solved with the NinjaTrader Relative Volume indicator. It allows you to compare the average volume at a specific time of day, with the average volume of the past N days. Therefore, it compares the overnight volume with the overnight session. Likewise, the volume of the European session is compared with the European session and the volume of the U.S. regular session with the U.S. regular session.

Relative Volume for NinjaTrader 8
Relative Volume vs. Volume Weighted Average

Furthermore, the indicator allows you to compare the average volume at a specific time and day of the week. This is useful for days and times where news reports are issued on a regular basis. For example, the weekly petroleum and natural gas reports are usually released on specific weekdays. Today’s volume is then compared with the average volume calculated for the same day of the week over the N preceding weeks.

Accordingly, our NinjaTrader Relative Volume indicator puts you in a better position to identify increasing / decreasing volume and filter out noise signals. The indicator can help determine whether to pursue breakout strategies when cumulated relative volume is above average. Alternatively the indicator can be used for strategies in ranging markets when volume is below average.

For instruments that lack reliable volume information (FX/Crypto currencies), you may consider using the Relative Ranges indicator, which was discussed this post.

To download the NinjaTrader Relative Volume indicator, visit our indicator library now: