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Effective Volume (EV) and Effective Ratio (DER)

Are the large players accumulating?

Chartmills charts, stockscreener and sector analysis tool support Effective Volume. Effective Volume was described in the book ‘Value in Time‘ by Pascal Willain. Pascal validated and approved our implementation.

For a thorough understanding of Effective Volume and its usage, we advise reading the book. More information can also be found on Pascal Willains website.

Effective Volume basically analyses the intraday volume on the minute level to determine what small and large players are doing in terms of accumulation and distribution. Interesting situations occur if the Large Effective Volume trend diverges from the price trend.

In our charts, the following Effective Volume indicators are present:

  • Effective Volume: S/L Players: shows the action of Small and Large players.
  • Effective Volume: S/L/A Players: shows the action of Small, Large and All players.
  • Effective Volume: All Players: shows the action of All platers
  • Effective Volume: Large Players: shows the action of Large players.

The screener allows you to filter on the properties of the Large Players Effective Volume. On the technical tab, there is a field named ‘LEV’ ( Large Effective Volume ) which can be filtered based on its 10 and 20 daily moving average. ( E.g: value above rising 10 DMA ).

You can find more details on practical usage of the EV indicator in this article.

Effective Ratio

In his book, Pascal defines the Effective Ratio as the total Effective Volume by Large Players divided by the total volume. This results in the percentage of volume that was accumulated or distributed by large players in a specific stock.

We use the effective ratio in our screener:

  • The technical tab has a field named acc/dist. Here you can filter on the 3 or 5 average daily effective ratio. If you select for instance ’3DER > 5%’, it will filter all stocks where the Daily Effective Ratio was over 5% on average in the last 3 days.
  • Stocks can also be sorted according to their 3 or 5 average daily effective ratio percentage. If you sort stocks on a descending 5DER, you will get stocks showing the strongest accumulation in the last 5 days on top.

The 3 and 5 Daily Effective Ratio are also used in our sector analysis tool:

The tool has 3DER and 5DER columns. This shows the average 3 or 5 Daily Effective Ratio of all stocks in the industry or sector.
The tools allows sorting the sectors by 3 or 5 DER. Sorting them will show you which sectors or industries show the strongest accumulation or distribution by large players.