Squat Ratio Indicator

The Squat Ratio is a market indicator that measures the relationship between volume and price movement to identify potential reversals or strong trends. It helps traders assess whether a price movement is supported by sufficient volume.

Formula for Squat Ratio


\text{Squat Ratio} = \frac{\text{Current Bar Volume}}{\text{Average Volume of Previous Bars}} \times \frac{\text{Current Bar Range}}{\text{Average Range of Previous Bars}}

Where:
• Current Bar Volume = Volume of the current price bar
• Average Volume = Average volume over a chosen period (e.g., 10 or 20 bars)
• Current Bar Range = (High - Low) of the current bar
• Average Range = Average of the past price ranges

How to Interpret Squat Ratio
1. High Squat Ratio (>1)
• Indicates that price movement is happening with higher volume than usual but is not breaking out significantly.
• Suggests potential accumulation (buyers stepping in) or distribution (sellers offloading).
• Could signal a trend reversal or strong breakout soon.
2. Low Squat Ratio (<1)
• Suggests that the price is moving with low volume, meaning the current move may lack strength.
• Often seen in weak trends or consolidation phases.

Using Squat Ratio in Nifty Trading
• If Nifty moves up with a high Squat Ratio, it may indicate strong buying interest and the potential for a breakout.
• If Nifty falls with a high Squat Ratio, it could mean strong selling pressure and a possible trend reversal.
• It can be used with other indicators like RSI, VWAP, and Delta for better trade confirmation.