A Very 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. You may use the indicator 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 you use a volume weighted average during the European session, a number of “false” volume spikes will appear. The reason is that it compares the volume with the overnight session, which is comparatively light on volume. You will see a similar issue when comparing a volume weighted average, Bollinger or Standard Deviation Bands with the U.S. regular session. One will frequently miss volume spikes because the lookback period includes the regular open. Of course, the regular open will frequently have the highest volume during the session.

Volume Weighted Average for NT8

Relative Volume for NinjaTrader 8

One may address this issue by instead using the NinjaTrader Relative Volume indicator. You can then 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, you may 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. One will then compare today’s volume with the average volume calculated for the same day of the week over the N preceding weeks.

How to use Relative Volume

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 you can use it for strategies in ranging markets, when volume is below average.

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

You may use the NinjaTrader Relative Volume indicator in combination with trend filters, trend analysis, momentum oscillators and/or support / resistance indicators. Please review the Trend Filters, Trend Analysis and Momentum Oscillators categories for additional information. Specifcally, you may consider the Adaptive Laguerre, ADX, Know Sure Thing or the Heikin Ashi candles for determining market trends. Finally, check out our support / resistance indicators, located in the Session Tools and Fibonacci Indicators categories.

To learn more about theRelative Volume indicator, visit the volume analysis category of our library of NinjaTrader Indicators or tap the link below:

Our indicators are available for NinjaTrader 8.