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This market breadth indicator calculates the ratio of total volume for advancing stocks to the total volume of declining stocks. In this volume ratio, Advancing stocks refer to stocks that have increased in the last 10 trading days, while declining stocks refer to stocks that have decreased in the last 10 trading days. The 10 bar period used in this volume ratio is not fixed and can be changed by updating the composite item.
This market indicator ratio first calculates the sum of volume for all stocks that are advancing and then the sum of volume for all stocks that are declining. It then uses a .Net script to divide the values of the first composite by the values of the second composite for the same date. The volume ratio cannot be lower than zero and can take high values. Example on March 23, 2009, this market indicator reached a value of 39, which means that volume for advancing stocks is 39 times higher than the volume of declining stocks. A volume ratio of one means that the volume used to buy stocks with a positive 10 bar rate of return is the same as the volume used to buy stocks with a negative 10 bar rate of return.
Volume ratio indicator allows us to measure the ratio of money flow into stocks that are increasing versus stocks that are declining. Higher values are bullish and lower values are bearish; however extreme values may indicate that market trend is about to reverse.
I have used the volume ratio for the US Stock Market but it can be applied to any market. You don't have to change anything, just perform a new calculation using symbols and quotes of your stock market.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
