Definition: Volume ratio can be obtained in a similar way to RSI . Volume Ratio (%) = 100 - 100/(1+vr) The parameter "vr" is defined as vr=(A+U/2)/(D+U/2)
A=Total volume of the periods when the price advance. D=Total volume of the periods when the price declined. U=Total volume of the periods when the price unchanged.
After substitution, following expression can be derived and the denominator represents total volume of all periods. Volume Ratio (%) = 100 x (A+U/2)/(A+D+U)
Notes: A similar method to interpret RSI can be employed. 1) Overbought level over 70% and oversold level under 30%. These levels need to be adjusted according to the periods, time frames and issues. 2) Bullish picture over 50% line and bearish picture under 50% line. 3) Crossing oversold level to the upside can be taken as a confirmation of bullish reversal. - and vice versa for a bearish reversal. 4) After a long-term bearish market, the increase of volume can happen in the early stage of a bullish market. 5) Buying opportunity can be suggested when the volume ratio is declining and the price is either advancing or leveling off.