Volume Forecasting [LuxAlgo]

20 apr 2023

The Volume Forecasting indicator provides a forecast of volume by capturing and extrapolating periodic fluctuations. Historical forecasts are also provided to compare the method against volume at time t.

This script will not work on tickers that do not have volume data.

🔶 SETTINGS

• Median Memory: Number of days used to compute the median and first/third quartiles.
  
• Forecast Window: Number of bars forecasted in the future.
  
• Auto Forecast Window: Set the forecast window so that the forecast length completes an interval.
  

🔶 USAGE



The periodic nature of volume on certain securities allows users to more easily forecast using historical volume. The forecast can highlight intervals where volume tends to be more important, that is where most trading activity takes place.



More pronounced periodicity will tend to return more accurate forecasts.



The historical forecast can also highlight intervals where high/low volume is not expected.

The interquartile range is also highlighted, giving an area where we can expect the volume to lie.

🔶 DETAILS

This forecasting method is similar to the time series decomposition method used to obtain the seasonal component.



We first segment the chart over equidistant intervals. Each interval is delimited by a change in the daily timeframe.



To forecast volume at time t+1 we see where the current bar lies in the interval, if the bar is the 78th in interval then the forecast on the next bar is made by taking the median of the 79th bar over N intervals, where N is the median memory.

This method ensures capturing the periodic fluctuation of volume.