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Whale Trading

Volume Ratio (VR): Reading Buying and Selling Pressure

In this article we cover VR (Volume Ratio) —
a way to summarize where actual traded volume is leaning.

The core question VR tries to answer is:

“Over the last N bars,
is more real money flowing into buying or into selling?”

The mindset we’ll keep is:

  • not “VR is above X, so I must buy/sell,”
  • but: “In this specific context,
    which side is actually committing more volume?”

The diagram below shows:

  • top: price action at range highs with a fake breakout vs a true breakout,
  • bottom: the corresponding VR behavior
    (weak response on the fake move, strong on the real breakout).

Understanding this structure will help you:

with a volume-based filter.

1. The Basic Idea of VR: “How Much, in Which Direction?”

The precise calculation of VR can vary by exchange/platform,
but most versions are built on a similar idea:

  • over a fixed lookback (N bars),
    • sum volume on up bars,
    • sum volume on down bars,
  • then compare the two.

Intuitively, VR is asking:

“In recent periods,
is more traded volume piling up on the buy side
or on the sell side?”

In other words:

  • volume shows “how much traded” overall,
  • VR adds another layer:
    “how much of that volume was tied to up vs down movement.”

2. VR in Trends vs Ranges

2-1. Trend environments: persistent VR bias

In a strong uptrend, we often see:

  • volume on up bars consistently larger than on down bars,
  • VR staying above a baseline for extended periods.

In a strong downtrend, the mirror image:

  • down-bar volume dominates,
  • VR shows a persistent downside bias.

Here, VR helps you check:

  • whether the trend you see via
    trend (MAs, DMI/ADX, etc.)
  • is actually backed by real volume,
    or if price is moving on thin or fading participation.

2-2. Range environments: VR flipping back and forth

In a clear range or box:

  • near the range high, VR may tilt to the buy side for a while,
  • then flip back toward selling as price is rejected,
  • with the opposite behavior at the range low.

This is typical of markets where:

  • neither side is in full control,
  • buying and selling pressure alternate as price oscillates within the box.

The diagram below compares:

  • left: an uptrend where VR stays consistently buy-biased,
  • right: a range where VR flips between buy and sell dominance near the top and bottom.

3. VR and Breakouts: Fake vs Real

VR becomes especially interesting around breakout attempts.

3-1. Typical fake breakout behavior

At the top of a range:

  • price may briefly spike above resistance,
  • but VR shows only a weak response.

In many cases, this implies:

  • there is not much fresh, aggressive buying,
  • but rather a short-lived move driven by:
    • short covering from trapped shorts,
    • or thin liquidity at the edge of the range.

If price:

  • quickly snaps back into the range, and
  • VR also drops back toward neutral or sell-dominant,

this lines up well with failed breakout patterns
you’ll see in failure.

3-2. Typical real breakout behavior

In contrast, for a genuine breakout:

  • price pushes through the range high,
  • and VR spikes strongly in the direction of the breakout,
  • then remains biased in that direction even on pullbacks.

This suggests:

  • new participation is entering with commitment,
  • which often accompanies trend continuation
    after patterns like those in triangle.

Again, this is never a guarantee, but:

“Price broke out” + “VR is confirming with strong volume bias”

is more informative than price alone when assessing
breakout quality.

4. Limitations and Traps When Using VR

VR is not a magic answer.
Some common pitfalls:

  1. Noise on very low timeframes

    • On 1–3 minute charts, a few trades can make VR swing wildly.
    • It often helps to also monitor a higher timeframe VR trend
      as discussed in timeframes.

  2. Event-driven volatility

    • Around FOMC, CPI, major listings/delistings, etc., both sides can see huge volume.
    • VR can become harder to interpret because everyone is trading everything.

  3. Illiquid markets and manipulation

    • Thinly traded coins or single-exchange markets are prone to distorted VR readings.
    • Pair VR with your instrument/exchange selection rules from
      risk-management.

  4. Using VR as a stand-alone signal

    • “VR above X = always buy” is a dangerous shortcut.
    • VR works better as:
      • a confirmation or filter for price/pattern setups,
      • combined with volatility tools (ATR/ADR) from
        volatility
      • to size positions and set targets realistically.

5. A Checklist for Using VR in Practice

When a VR move catches your eye, run through:

  1. “Is this a trend or a range?”

    • Use trend,
      s-r
      to classify the environment first.

  2. “Where in the structure is this VR signal happening?”

    • Range high/low,
    • key support/resistance,
    • pattern boundaries from chart.

  3. “How does this relate to breakout/failure patterns?”

    • When price breaks a level, does VR:
      • explode higher in that direction,
      • or just flicker and fade?

  4. “How does this change my risk plan?”

    • Even a strong VR bias doesn’t justify:

6. Recommended Next Reads

VR is usually most effective in combination with other tools:

Whenever you look at VR, keep the question:

“Which side is actually putting real money to work
at this price level?”

at the center, rather than treating any single reading
as a guaranteed signal.