Relative Volume Indicator (RVOL)

Relative Volume Indicator (RVOL)

The Relative Volume Indicator (RVOL) helps traders identify unusual volume activity by comparing the current volume to the average historical volume. This makes it easier to spot potential breakouts, reversals, or significant market events that are accompanied by volume confirmation.

What This Indicator Shows

This indicator displays volume as a multiple of average volume, where:
- 1.0x means 100% of average volume
- 2.0x means 200% of average volume (twice the average)
- 0.5x means 50% of average volume (half the average)

Color Coding

The volume bars are color-coded based on configurable thresholds:
- Red: Below average volume (< Average Volume Threshold)
- Yellow: Average volume (between Average Volume and Above Average thresholds)
- Green: Above average volume (between Above Average and Extreme thresholds)
- Magenta: Extreme volume (> Extreme Volume Threshold)

Horizontal Reference Lines

Three dotted horizontal reference lines help you visualize the thresholds:
- Lower gray line: Average Volume Threshold (default: 0.8x)
- Upper gray line: Above Average Threshold (default: 1.25x)
- Magenta line: Extreme Volume Threshold (default: 4.0x)

How To Use This Indicator

1. Volume Confirmation: Use green bars to confirm breakouts or trend changes - stronger moves often come with above-average volume.

2. Low Volume Warning: Red bars during price movements may indicate weak conviction and potential reversals.

3. Extreme Volume Events: Magenta bars (extreme volume) often signal major market events or potential exhaustion points that could lead to reversals.

4. Volume Divergence: Look for divergences between price and volume - for example, if price makes new highs but volume is decreasing (more yellow/red bars), the move may be losing strength.

Settings Configuration

- Average Volume Lookback Period: Number of bars used to calculate the average volume (default: 20)
- Average Volume Threshold: Volume below this level is considered below average (default: 0.8x)
- Above Average Threshold: Volume above this level is considered above average (default: 1.25x)
- Extreme Volume Threshold: Volume above this level is considered extreme (default: 4.0x)
- Colors: Customize colors for each volume category

Important Note: Adjust threshold values only through the indicator settings (not in the Style tab). Changing values in the Style tab will not adjust the coloring of the volume bars.

Adjust these settings based on the specific asset being analyzed and your trading timeframe. More volatile assets may require higher thresholds, while less volatile ones might need lower thresholds.