Absolute Tick Volume by Charles F. Wright
Volume is one of the major tools used in technical analysis. The volume of a particular day or intraday bar is used as a gauge for activity during the time period. Trading judgments are based on traders' interpretation of that volume number. Conventional volume analysis centers around two points: First, higher volume is beneficial to the trend — higher volume confirms the move while lower volume makes the move suspect, and second, the importance of the bar volume lies in its relation to the volume of the previous bar. Since almost all technical analysis centers around this assumption — comparing today's number with yesterday's — it comes as no surprise that the same assumption is used for volume.
The STAD Research Team, which is a small group that brainstorms for new ideas to be tested in System Trading and Development newsletter, assumes that conventional indicators used in common ways will not work well. If they did, trading would be an easy way to make a living. The group tries to use old indicators in new ways, testing the new ideas with System Writer Plus. Rather than compare today's number with yesterday's, STAD has been exploring other ways to look at volume. One of the more promising concepts is using absolute volume rather than comparative volume.