The volume indicator will announce that a move will happen, and the other indicators will either confirm the prophecy or disapprove of it. And it also helps you see which stocks will make the next big moves. The bottom line is relative volume is akin to unusual volume.
Select the ratio you want to search for from the relative volume dropdown list. StocksToTrade displays the average volume for a stock in the basics box. Or if you like my morning panic dip buy strategy, watch for relative volume to increase at a support level.
How to Interpret Level 2 Data
Importantly, high relative volume doesn’t necessarily cause increased volatility. Trading volume accounts for both the buying and selling of shares, so any price movement will depend on the balance of buyers and sellers in the market for that stock. By the same token, a relative volume of 5 could see a stock move $2.50 in one direction, or it could see the same stock move $5.00 in one direction.
This information allows you to make timely decisions based on real-time data rather than relying on guesswork or emotions. This is especially important when dealing with volatile stocks that can experience sudden spikes in volume. With its proven track record and easy-to-use calculations, it’s a valuable resource for any serious trader looking for an edge in the market. Stocks that trade with a high RVOL ratio are often the ones that present the most significant profit opportunities.
What Is Webull Positions Cost Distribution
And that’s exactly what I like to see in the stocks I trade. Stock with a high relative volume is more likely to be bought and sold than a stock with a low relative volume. As such, relative volume can be directly correlated to the potential trends in the market and help identify possible trends.
- The Relative Volume, or RVOL, indicator helps to overcome this by comparing the current volume with the average volume for that time of day, calculated over a period of days.
- Make sure you test your buying and selling strategies before you risk any money based on RVOL.
- This can help them identify supply and demand imbalances and make trades with a higher commitment to the price move.
- One trading indicator that you may not have considered yet is the relative volume scanner.
- Four to five indicators should be enough on your Webull chart.
- In order to understand the concept of Position cost distribution, you need to assume that all the shares are bought and held by the investors.
Whether you choose to believe that it does or not is up to you. One method to add a Relative Volume/RVOL Indicator on Thinkorswim is to use the free indicators https://forexhero.info/what-is-hugofx/ developed by Melvin E. Dickover. The first is RelativeVolumeStDev and the input parameters and plots are given so you can try it out yourself.
Charting the Average Volume of a Stock
I like to say that stocks have personalities … They can have different price action, display Level 2 differently, and they can have clean or choppy charts. RVOL spikes occur when today’s volume surpasses recent ranges. Conversely, relative volume depressed values happen when today’s volume is subdued compared to recent activity. The Relative Volume/RVOL study on Thinkorswim plots the relative volume for each bar, which is simply today’s volume divided by the 10-period Average True Range (ATR). So if you see RVol as 200% with input length of 10 days, today’s volume is 2x compared to past 10 days. It helps if today’s volume is already reached 20% or 30% within 30mins of market open, etc.
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This tool can be used to identify stop loss hunters and organized dumps. It uses a variety of moving averages to hide usual activity and features an LSMA line to show trend. Relative volume is one indicator to help traders and investors look for stocks that are experiencing unusual trading activity.
Relative Volume: What It Is and How to Use It
You can use your stock screener to search for stocks based on the relative volume ratio you want to see. You could also find the relative volume on your trading platform as an indicator called RVOL. And the relative volume indicator can help you spot high-volume stocks quickly. Supporting documentation for any claims, comparison, statistics, or other technical data will be supplied upon request. TD Ameritrade does not make recommendations or determine the suitability of any security, strategy or course of action for you through your use of our trading tools.