Setting Volume-Clock Sampling Thresholds with Average Daily Volume

Summary

The document addresses how to choose a threshold for volume-based sampling bars, in response to a question about setting the dollar value for dollar bars. The suggested approach uses a rolling average of recent volume to set a target sampling frequency: estimate average volume over a 30-day window, then divide that amount by a target of about 50 samples per day. The resulting quantity is the threshold for a volume clock.

This is a rule of thumb drawn from cited literature, not a tested universal setting. The response does not explain how to convert the volume threshold into a dollar-bar threshold, compare alternatives such as an exponentially weighted average, or assess how the choice affects a trading strategy. It offers a starting procedure for volume-based sampling, with limited evidence and no instrument-specific guidance.

Key ideas

• A rolling average of recent volume can help determine a volume-clock threshold.
• The suggested procedure targets roughly 50 samples per day using a 30-day average.
• Dividing average volume by the target sampling count yields the threshold level.
• The recommendation is a literature-based rule of thumb, not a demonstrated optimum for every market or instrument.

Tags

# Dollar bars in Advances in Financial Machine Learning book


# Dollar bars in Advances in Financial Machine Learning book












Does anyone have use the dollar bars for building a strategy? I would like to know what ways you guys might be interested to set the dollar bars' parameter ( the dollar value ). I have thought of one way is to take the EMA of the past 20 days' daily dollar value but that seems not robust enough.

## Answer by Jacques Joubert (score 2)

https://quant.stackexchange.com/a/50942

If you read the literature in the references and bibliography sections you will see that a common technique is to sample about 50 times a day. This is done by calculating the 30 day moving average of volume and then dividing by 50.

This will give you the threshold level needed for sampling on a volume clock.

Shown in full with attribution under the source's licence. Licence: CC BY-SA 4.0 (Stack Exchange)

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.