What is a good relative volume for day trading?

There is no fixed number. Many momentum traders want at least 2, twice the usual volume, before they look at a stock, and the Top Relative Volume scan in Hindsight Markets starts there.

How is relative volume calculated?

Divide today's volume by a normal amount for the stock. The normal amount is either a full average day or, better during the session, the average volume by this time of day over recent days.

What is the difference between relative volume and relative volume at time?

Plain relative volume often compares today's volume so far with a whole average day, so it starts low every morning and climbs. Relative volume at time compares with the same point in a normal day, so it can read high from the first hour.

What is the difference between relative volume and average volume?

Average volume is a number of shares, such as 1 million a day. Relative volume is a ratio: today's volume against that average.

Why does a new stock show no relative volume?

RVOL needs past days to compare with. A recent listing has too little history, so most scanners leave it blank until there is enough.

Does relative volume include pre-market volume?

It depends on the tool. In Hindsight Markets the full-day measure counts today's volume so far with the pre-market included, which is why it already means something before the open.

Glossary

Relative volume (RVOL)

Relative volume, or RVOL, compares how much a stock has traded today with how much it usually trades. An RVOL of 2 means twice its normal volume, and momentum traders use it to tell a stock that is in play from one that is just drifting.

Why it matters to a small-cap momentum trader

Volume is attention, and a big move without it rarely lasts. A small cap trading many times its usual volume has new buyers and sellers in it, usually because of news, and that is where the liquidity and the range are. RVOL also puts stocks on the same scale: a stock that trades a few hundred thousand shares a day and one that trades tens of millions can both be measured against their own normal.

How it is measured

Full day. Today's volume divided by the stock's average daily volume over a recent period.

Time of day. Today's volume so far divided by what the stock usually trades by the same time of day, so 10:00 a.m. is compared with 10:00 a.m. This is the better intraday measure.

Before the open. Almost nothing usually trades at 7:00 a.m., so the time-of-day number can swing wildly in the pre-market, and pre-market scanners often compare with the average full day instead.

There is no standard definition, so two scanners can show different RVOL for the same stock.

Relative volume in Hindsight Markets

The scanner has relative volume by time of day, for the full day, and over the last few minutes, each counted only from what had traded by that moment in the replay.

A worked example: three ways to measure the same morning

An illustration with made-up numbers, not a real stock or a real day. The stock usually trades 1,000,000 shares a day, about 400,000 of them by 10:00 a.m. and about 2,000 by 7:00 a.m.

Time of day, at 10:00 a.m. 2,000,000 shares have traded. RVOL = 2,000,000 ÷ 400,000 = 5.

Full day, at 10:00 a.m. 2,000,000 ÷ 1,000,000 = 2. It has already traded two normal days' worth.

Time of day, at 7:00 a.m. 60,000 shares have traded. RVOL = 60,000 ÷ 2,000 = 30, which looks dramatic but is only 60,000 shares. The full-day number, 60,000 ÷ 1,000,000 = 0.06, keeps it in proportion.

Common mistakes small-cap traders make with relative volume

Forgetting the direction. High RVOL says a stock has attention, not which way it is going. A stock being sold hard has high RVOL too.
Trusting a huge early number. Before the open, time-of-day RVOL divides by almost nothing. Check the shares behind it.
Ignoring the shares. An RVOL of 10 on a stock that normally trades 20,000 shares a day is still too thin to trade with size.
Comparing numbers from two tools. One scanner's RVOL of 3 can be another's 5. Learn one tool's numbers and stay with it.

Common questions

What is a good relative volume for day trading?: There is no fixed number. Many momentum traders want at least 2, twice the usual volume, before they look at a stock, and the Top Relative Volume scan in Hindsight Markets starts there.
How is relative volume calculated?: Divide today's volume by a normal amount for the stock. The normal amount is either a full average day or, better during the session, the average volume by this time of day over recent days.
What is the difference between relative volume and relative volume at time?: Plain relative volume often compares today's volume so far with a whole average day, so it starts low every morning and climbs. Relative volume at time compares with the same point in a normal day, so it can read high from the first hour.
What is the difference between relative volume and average volume?: Average volume is a number of shares, such as 1 million a day. Relative volume is a ratio: today's volume against that average.
Why does a new stock show no relative volume?: RVOL needs past days to compare with. A recent listing has too little history, so most scanners leave it blank until there is enough.
Does relative volume include pre-market volume?: It depends on the tool. In Hindsight Markets the full-day measure counts today's volume so far with the pre-market included, which is why it already means something before the open.

How to practise it in Hindsight Markets

Open a past day at Pre-market 04:00 and add the Relative volume (full day) column to a gap scan.
After the open, run Top Relative Volume, which lists stocks trading at least twice their usual pace for the time of day.
Add Relative volume (recent candles) to see which stock is waking up right now.
Open the leaders on a chart and check the volume bars against the price: is the volume buying or selling?
Replay the same morning and note which stocks the volume found first, and what they did next.

Practice this on a real past day in Hindsight Markets

Replay a real morning, sort the scanner by relative volume, and see which stocks the volume found first.