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.

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

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.