Relative Volume
Indicator Type: Standalone
Chart Type: Interactive Only
Relative volume is a powerful measurement and is used to identify whether volume flows are increasing or decreasing. It measures current volume in relation to the “usual” volume for the same period.
What is considered “usual"? For that, we have to use a historical baseline known as the average daily volume. That means how much volume a stock does on a daily basis over a defined period.
A 6 month average of 1 million means that the stock has traded an average of 1 million shares per day, over the last 6 months.
A 5 day average of 4 million means that the stock has traded an average of 4 million shares per day, over the last 5 days.
- Relative volume or RVol, is a ratio that calculates current volume to average volume.
- Relative volume or RVol, tell us if volume flows are increasing or decreasing.
- A high relative volume tells us that there is increased trading activity in a stock today.
- Increased volume flows often accompany higher volatility i.e. a significant price move.
- The equation of today's volume over average volume is simplistic and can only be used for end-of-day analysis.
Sample Chart:
Calculation:
Relative volume is defined by a ratio. The equation to derive the relative volume ratio is very simple.
Today’s volume / Average volume
Example – Measuring against the 50 day average
Today’s volume for AAPL is 10 million.
50 day average daily volume is 1 million.
The relative volume ratio is 10 million/1 million = 10x.
This means that for today, AAPL has traded 10 times its 50 day average daily volume.
Default Parameters:
Smoothing: The type of moving average used (default MA)
Period: 50
Baseline: 1
Source: Stockbeep.com