Volume Surprise: Comparing Trading Volume With Time-Based Expectations

Summary

The indicator estimates expected volume for each time grouping and compares current volume with that baseline. Groupings can use minutes, hours, days, months, or quarters, alone or in combination. For a given group, it stores recent observations and calculates their mean or a selected percentile. A histogram of actual minus expected volume highlights whether activity is above or below the estimate, while an optional projection displays expected values for upcoming periods.

The notes suggest using high or low percentiles to make unusually large or small volume stand out. They describe possible uses in assessing market interest and examining activity around events, but offer no performance study. Results depend on sensible grouping choices and enough comparable history; too many or too few groupings can weaken estimates. The author cautions that assets without regular trading patterns, such as many cryptocurrencies, may produce less reliable comparisons and forecasts.

Key ideas

• Expected volume is calculated from historical observations sharing the selected time group.
• The summary can use a mean or a chosen percentile to adjust the reference level.
• The difference between observed and expected volume is plotted to reveal relative activity.
• Period selection and the asset’s regularity affect how useful the estimates are.

Tags

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