Volume Ratio

Definition

The Volume Ratio measures the relative dominance of buy volume versus sell volume from executed market orders within a specific timeframe. It provides insight into order flow imbalance by comparing the net difference between buy and sell volumes against their combined total.

Volume Ratio=Buy VolumeSell VolumeBuy Volume+Sell Volume\textbf{Volume Ratio} = \frac{\textbf{Buy Volume} - \textbf{Sell Volume}}{\textbf{Buy Volume} + \textbf{Sell Volume}}

Key Components:

  • Buy Volume: The total volume of market buy orders executed during the timeframe.

  • Sell Volume: The total volume of market sell orders executed during the timeframe.

  • Ratio Range: The ratio is typically bounded between -1 and +1, where:

    • +1: 100% buy volume dominance (only buy orders).

    • -1: 100% sell volume dominance (only sell orders).

    • 0: Equal buy and sell volumes, indicating balance.

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