Relative Volume

Description

The Relative Volume (RVOL) indicator is a volume-based technical analysis tool that compares the volume of a given price bar to the average volume over a specified number of prior bars. RVOL measures the significance of volume changes, highlighting situations where trading activity is unusually high or low compared to historical norms. It can help traders identify potential breakouts, reversals, and other trading opportunities by providing insights into the market’s interest in a particular financial instrument.

Input Parameters

Length: Number of periods used in the calculation.
MA Type: Select the moving average type such as EMA, SMA, or HullMA.
Base: The reference point or benchmark against which the current volume is compared. For example, 1.1 ‘Base’ is 10 percent greater than the average volume (if the average volume equals 1).

Use Case:

Trading Volume and Price Action: RVOL helps understand the significance of volume in relation to price action. When the RVOL is above 1, it indicates that the current volume is higher than the average volume for the specified lookback period, suggesting increased interest in the financial instrument. Conversely, an RVOL below 1 suggests lower-than-average volume, indicating reduced market interest.
Finding Potential Trading Opportunities: Traders can utilize RVOL to uncover trading opportunities in various ways:
1. Breakouts: A sudden increase in RVOL accompanying a price breakout above resistance or below support levels can indicate the potential for a strong trend to develop.
2. Reversals: A high RVOL during a price reversal, such as at key support or resistance levels, can suggest that the reversal is significant and may continue.
3. Consolidation: Low RVOL values during price consolidation can indicate a lack of interest in the current trading range, potentially leading to a breakout once volume picks up again.

This feature can be used in: