What is Relative Volume and How do we Use It? 🙋

in this video we'll talk about what is relative volume and how do we use it stay tuned I traded a very warm welcome to you okay so what is relative volume or otherwise known as our vol this is something you see on some trading platforms it's also something you can code yourself and have done yourself I also know that some other charting packages well have it what is it how useful is it let's talk about it so relative volume is it compares the current volume to the normal volume for the same time of day and expresses it as kind of ratio so let us say look at the first hour of trade so this is our first hour of trade here okay it's going to compare the current level of volume so let's say us our volume level here against the normal volume and is going to give us a number if that if it's running at twice the normal volume the number is going to be two because running a three and a half times is going to be three point five you get the idea so what we're doing is this for an intraday trading obviously it's a kind of tool that you're going to look at as an intraday trader and the reason you look at this is you say to yourself how active is this stock or how active is this market compared to its normal in inverted commas so why is that of any use to us well if it's more active first of all actually you know we'll do well let's just define volume so volume I know people going to kind of think well we're not volume is but let's just make sure on the same page if volume is the number of units traded in whatever we're looking at if it's stock it's the number of shares if it's a futures contracts the number of contracts if its currency slightly different might be the value with total value of the currency based in pounds or in dollars or in yen whatever it may be the point is it's a I understood a unit of value doesn't necessarily mean a number of trades like I could trade with you we could trade a million shares each that would be one transaction but the volume would read one million so theory is the more volume we have the more participants we have that's a little bit of a generalization because you could have one or two big participants but generally speaking the more volume the more people are getting involved in the more people excited about the market the more people are taking a position the more people are cutting a position off and you see that in charts all the way over guys big moves tend to come with big volumes so the point is if we're looking at this and we're seeing a high relative of volume as a trader we want to be involved in that because it means more participants it probably means more range means more volatility it means more opportunity if we looked at it and we saw a relative volume of say 0.5 which we often see on quiet days before holidays or you know other days where there's nothing going on then we don't want to really get involved in it too much as traders and then from a technical perspective if we see high relative volume what strategies you think we'd want to trade we do probably want to trade momentum strategies trades that are doing kind of inside out so from me to extreme type trades are we we're not going to generally I'm generalizing of course we have to in trading we probably wouldn't want to be kind of trading me reverting because ultimately more volume coming in generally results in a bit of a range of expansion a bit of a more range than usual I'd say there are many opportunities there's fate highs and lows but generally we know that if more people are pushing in one direction and we're seeing a big aggressive move we're going to very cautious about fading that and similarly you know there's nothing worse if we've got a really quiet day just trying to force a breakout trade most of the time breakouts are not gonna work in your favor when volume or relative volume on a day is low because the participants are not there there's no flow there's no reason for people to get make urgent decisions they're leaving price orders in limit orders in they're not getting filled they're not going to market therefore they're not moving the price it doesn't make sense to get involved so it's comparing the current volume to the same time of day now if you've got a custom indicator I like one made before which I use which draws data in and compares it to whichever timeframe I want so I can have the first 15 minutes I can see hey this volume is running up you know a lot more on this for 15 minutes than normal and again if you're coding so if you can define normal if you're using from a platform you're gonna have to see how they create that formula what they take normal from let's take an average over that period they take a mean they take which is the average to take a mode you know how do they do it and then you can work out yourself but then it doesn't really matter the point is all we're looking for apparently excuse me you're traders is something unusual and if we see a stock that's running on high rates of volume perhaps after earnings or perhaps it's a currency pair that's a high relative volume or so futures contract it means that a lot of people are getting involved in it when we have a lot of people getting involved in it it creates and presents opportunity I know guys that's relative volume and that's what Paul I've got for you I hope you take care and I hope you manage the risk and good trading I shall see you on the next one bye bye you

Channel: UKspreadbetting

Views: 25,312

Keywords: intraday trading, relative volume, volume indicator, relative volume indicator, rv indicator, day trading, volume analysis, technical indicators, what is relative volume

Id: _s2vkOOMwo0

Length: 5min 34sec (334 seconds)

Published: Wed Dec 06 2017