CumulativeOvernightVolume

Description

The Cumulative Overnight Volume is a technical indicator that detects unusually high volume during the overnight trading session. Based on the observation that nightly volume is very often proportionate to both daily volume and daily volatility, the study can be used when assessing possible daily price range. Mathematically, the study compares the volume traded last night (from midnight to 8:30 am Central Standard Time (CST)) to the average nightly volume over the last five days. Note that since thinkScript uses timestamps based in Eastern Standard Time (EST), the default numbers in the input parameters are adjusted accordingly. Note also that the study will only work on intraday charts with a maximum aggregation period of 1 hour.

The values produced by the Cumulative Overnight Volume study can be used with the First Hour Breakout strategy to detect whether a statistical volatility bias is confirmed. The statistical volatility bias can be detected if the volume traded last night is greater than the average nightly volume over the last five days. On the chart, the cumulative overnight volume is displayed as a series of histograms and the last bar in each histogram represents the total volume traded during the respective overnight trading session. The average volume is plotted across the histogram as long horizontal dashes. If the overnight volume is greater than the average, the last bar in the corresponding histogram is shown in a different color so that the statistical volatility bias can be easily spotted. 

Note that when the Cumulative Overnight Volume is added to a chart, the price plot will use different colors for different trading periods during the day. The following periods will be distinguished:

  • Night session from midnight: midnight till 8:30 am CST
  • First hour: 8:30 am CST till 9:30 am CST
  • Main session: 9:30 am CST till 3:15 pm CST
  • The rest of the trading day: 3:15 pm CST till midnight

You can turn off the price plot coloring using the study input parameters.

Input Parameters

Parameter

Description

night session from midnight

Defines the start of the midnight trading session in the EST time zone, 24-hour hhmm notation.

first hour trading

Defines the start of the day trading session in the EST time zone, 24-hour hhmm notation.

main session

Defines the start of the main session (by default, one hour after the market opens) in the EST time zone 24-hour hhmm notation.

night session from main session end

Defines the end of the main session in the EST time zone, 24-hour hhmm notation.

paint bars

Defines whether or not to color the price plot according to the trading period during the day (see the study description).

Plots

Plot

Description

CumulativeOvernightVolume

A histogram that illustrates the cumulative volume traded last night.

AverageOvernightVolume

The average nightly volume over the last five days.

Further Reading

1. "Daytrading With Night Volume" by Domenico D'Errico. Technical Analysis of Stocks & Commodities, June 2017.

Example*

*For illustrative purposes only. Not a recommendation of a specific security or investment strategy.

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