You are here

VOL - Volume

Printer-friendly versionPDF version

Volume measures the number of contracts that changed hands during that trading session. This indicator of market activity can show whether trade was heavy or light. That will give you an idea of the possible volatility present in that market. VOL does not give straight buy or sell signals or have set trading rules. Rather it shows the cyclical tendencies of the market. The flow of the underlying market can be represented. Looking at VOL shows whether new buyers or sellers are entering the market or if they are liquidating positions.

There are basic common sense rules for this indicator. If the prices are up and VOL is increasing, the market is strong. If the prices are up and VOL is declining, the market is getting weaker. If the prices are down and VOL is rising, the market is getting stronger. If the prices are down and VOL is declining, the market is getting weaker.

In bull markets, volume tends to increase during rallies and tends to decrease on reactions. In bear markets, volume tends to increase on declines and decrease during rallies. Trading volume usually increases dramatically at tops and bottoms. Looking at the volume can help you determine the liquidity of the market.

Calculation

This study has no computations. The values for volume are transmitted from the exchanges.

Tick Volume Indicator: Volume-based charts display the volume indicator as Tick Volume (TVOL). The Tick Volume Indicator displays the actual number of trades that it took to reach the volume that created each bar. For example, if you have chosen a volume bar of 2000, the TVOL bar will display the number of trades it took to get to a quantity of 2000 contracts. 1000 trades of quantity 2 would produce one volume bar on the chart, and a TVOL bar of 1000. To the opposite extreme, institutional traders might make 4 trades of quantity 500 to produce one bar on the chart, and the TVOL bar would be 4. Note:  Given a volume-based chart, our normal volume indicator would have shown bars equal in height for each bar that existed on the chart.

Example of Volume

Preferences

Open the Preferences Tab in your Control Panel. Select the VOL quick link at the right of the indicator window. (Once you click on the chart, the Preference tab will go back to chart settings.)

1. Restore Settings: TNT Default will change your settings back to the original software settings. My Default will change current settings to your personalized default settings. Apply To All Charts will apply your selected settings on all open charts. Save As My Default will save your current personal settings.

2. Volume: Change the color and the line style of the Volume line.

3. Alternate: Select to view the Volume Indicator in two colors. You can change the color and line style as well.

4. Compare with: When the Alternate option is selected you can compare the price day to day based on Previous Period Open: high, low, and close, or the Current Period Open: high or low.

5. Display as: View the Volume Indicator as a line, histogram, or filled line.

6. Open Interest: The total number of options and/or futures contracts that are not closed or delivered on a particular day (Held open after market close).    *Open Interest (OI) is available for futures daily charts only*

7. Averages: Moving averages of volume. The checkbox turns on and draws the moving average. The ability is given to set the line's color, thickness, and type. The period specifies the number of bars that are calculated in the moving average. The types of moving average available are simple, linear weight, or extra smoothed.

8. Thresholds: Gives you the option of displaying four threshold lines, which can be displayed as a value or a percentage in the Indicator Window. You also have the option to change the color of the threshold line.