What to measure? Volume or share proportion?
Updated
What to measure? Volume or share proportion?
Recently I keep thinking about what metric I should use to measure the strength of a trend.
Is it volume?
Of course, the volume would be a handy metric to look for. But let me tell you something:
Volume is often a biased figure, because if you only look for volume:
(1) You don't have any idea on how much money has been taken out/putting in a particular stock.
(2) You don't have any idea on how that amount of money affect your stock
For example, a stock with 10M volume and $0.001 each share would be very different from stock with 10k volume but with $10 each share,,,,
Or is it Volume*Price?
Volume*Price is a very effective way to measure the amount of money putting in a particular stock, but it still does not reveal the magnitude of this amount of money being put into
I have a different approach to this matter.
Since the pinescript @version4 allows us to plot the marketcap, now we can figure out how money flow impacts a particular stock.
Market Capitalisation is the total dollar market value of all of a company's outstanding shares.
Let's say it is roughly equal Total shares * Price.
And then we have the Volume amount.
My idea is that we can interpret the % of shares being traded within a particular point of time by calculating:
p % = (Marketcap * volume) /price
This p% represents how much proportion of the total supply is being traded. The higher it is, the stronger the current trend and vice versa.
The current Blue line that you are seeing is the %p of shares being traded. On some huge stocks like Banks, Apple or CBA it is just a few fractions for any given day. Some other less popular ones could observe ~1-3% of total supply being traded per day.
I even applied RSI to the %p. On the 5M time frame with Session Breaks displayed, I can see that on a daily basis the market moves in CYCLES.
The majority of money/volume that actually moves the market usually climaxed at the beginning/end of the market session and cooling down in midday.
(As people usually say stocks will come up again in the afternoon).
I am also looking to integrate this one with the Volume Profile on higher timeframes.
You can apply this observation to hop on the bandwagon or to day trade.
It is up to you.
Recently I keep thinking about what metric I should use to measure the strength of a trend.
Is it volume?
Of course, the volume would be a handy metric to look for. But let me tell you something:
Volume is often a biased figure, because if you only look for volume:
(1) You don't have any idea on how much money has been taken out/putting in a particular stock.
(2) You don't have any idea on how that amount of money affect your stock
For example, a stock with 10M volume and $0.001 each share would be very different from stock with 10k volume but with $10 each share,,,,
Or is it Volume*Price?
Volume*Price is a very effective way to measure the amount of money putting in a particular stock, but it still does not reveal the magnitude of this amount of money being put into
I have a different approach to this matter.
Since the pinescript @version4 allows us to plot the marketcap, now we can figure out how money flow impacts a particular stock.
Market Capitalisation is the total dollar market value of all of a company's outstanding shares.
Let's say it is roughly equal Total shares * Price.
And then we have the Volume amount.
My idea is that we can interpret the % of shares being traded within a particular point of time by calculating:
p % = (Marketcap * volume) /price
This p% represents how much proportion of the total supply is being traded. The higher it is, the stronger the current trend and vice versa.
The current Blue line that you are seeing is the %p of shares being traded. On some huge stocks like Banks, Apple or CBA it is just a few fractions for any given day. Some other less popular ones could observe ~1-3% of total supply being traded per day.
I even applied RSI to the %p. On the 5M time frame with Session Breaks displayed, I can see that on a daily basis the market moves in CYCLES.
The majority of money/volume that actually moves the market usually climaxed at the beginning/end of the market session and cooling down in midday.
(As people usually say stocks will come up again in the afternoon).
I am also looking to integrate this one with the Volume Profile on higher timeframes.
You can apply this observation to hop on the bandwagon or to day trade.
It is up to you.
Comment
Edit: I've messed up the calculation.Market capitalisation = Total Available Shares (TAS) * Price
What we want to calculate is (Volume/TAS)*100
Hence, %p should be:
Volume * Price
%p = _____________ * 100
Market Cap
The indicator in my idea has the correct calculation though
mdeous: the %p is an unidirectional value, it shows you how much percentage of available stock is being traded rather than price direction. What I do with this indicator is to judge whether a trend is worth enter or not. We still need our own judgement (or Moving Averages) to determine the price trend.
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