How do you calculate relative volume?
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Relative Volume (often times called RVOL) is an indicator that tells traders how current volume is compared to past trading volumes over a given period. It is kind of a like a radar for how “in-play” a stock is. The higher the relative volume is the more in play it is because more traders are watching and trading it. This is something that I look for in all the stocks I am trading and is an important indicator to keep tabs on.
Relative Volume is displayed as a ratio. So if it is showing 3.5 relative volume, that means it is trading at 3.5 times its normal volume. As day traders we like to see RVOL at 2 or higher with a positive catalyst, low float and ideally a higher short interest. When all of this falls in line together we have a recipe for parabolic moves that can make trading months and sometimes even years.
This is also a good metric to watch for potential bottoming or topping in stocks. As a stock gets oversold or overbought we want to look for volume to get a spike in relative volume which would indicate that buyers and seller are fighting over an important support or resistance level and will likely reverse.
Relative Volume is displayed as a ratio. So if it is showing 3.5 relative volume, that means it is trading at 3.5 times its normal volume. As day traders we like to see RVOL at 2 or higher with a positive catalyst, low float and ideally a higher short interest. When all of this falls in line together we have a recipe for parabolic moves that can make trading months and sometimes even years.
This is also a good metric to watch for potential bottoming or topping in stocks. As a stock gets oversold or overbought we want to look for volume to get a spike in relative volume which would indicate that buyers and seller are fighting over an important support or resistance level and will likely reverse.
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