Studying the Volume behaviour in a stock and index futures plays a critical role in studying the supply and demand behavior. What if we want to rate the volume with relative to last 50-bars. In such a scenario Normalized Volume Comes into picture. Normalized volume is a volume divided by its average.
Normalized Volume = Volume / MovingAverage(Volume, 50) * 100
Normalized Volume > 150 is High Volume (Green Historgram bar)
Normalized Volume < 75 and > 150 is normal Volume (Yellow Historgram bar)
Normalized Volume < 75 is low volume (Red Historigram bar)
Generally when the normalized volume is high it introduces lots of volatility in the market. And typically a low volume shows a low volatile behavior in the market.
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