OPEN-SOURCE SCRIPT
Relative Volume (RVOL) by shazwanblack
Relative Volume (RVOL) Indicator
The Relative Volume (RVOL) indicator helps traders assess the strength of current market activity by comparing the current volume to the average volume over a specified period. This indicator is useful for identifying significant volume spikes, which could indicate potential market moves like breakouts or reversals.
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Key Features:
VolumeComparison: The indicator compares the current trading volume to the average volume over a defined number of previous bars (default 20 bars).
Threshold Highlighting: The indicator visually highlights when the current volume exceeds a defined threshold (default 1.5x the average), helping to spot periods of heightened market activity.
Color-Coded Bars:
Green Bars: Indicate that the current volume is above the threshold, suggesting increased market activity.
Red Bars: Indicate that the current volume is below the threshold, suggesting normal or low activity.
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Customizable Inputs:
Volume Period: Defines the number of bars over which the average volume is calculated.
RVOL Threshold: Sets the level at which volume spikes are highlighted.
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How to Use:
1. Spotting Volume Spikes: Look for green bars, which indicate that the current volume is significantly higher than usual. This could be an early sign of a potential breakout or other major market movement.
2. Analyzing Trends: If volume is consistently above the threshold, it may indicate strong market interest or momentum. Conversely, if volume remains low (red bars), it could suggest a lack of conviction in the current price action.
3. Fine-Tuning: Adjust the Volume Period to fit the specific asset you’re analyzing. A shorter period may be more responsive to recent volume changes, while a longer period provides a smoother, more stable average.
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Combining RVOL with Other Indicators:
1. Moving Average (MA) or Exponential Moving Average (EMA):
RVOL can be paired with moving averages to confirm trends or identify potential reversals.
Strong Trend Confirmation:
Bullish Case: When RVOL is green (above the threshold) and the price is above the MA/EMA, it suggests strong buying momentum.
Bearish Case: When RVOL is green and the price is below the MA/EMA, it indicates strong selling momentum.
Weak Market Signals:
If RVOL is red (below the threshold) while the price hovers near the moving average, it may suggest indecision or weak trend strength.
Usage Example:
Apply a 50-period EMA for trend direction.
Look for green RVOL bars to confirm price breakouts from the EMA.
Use red RVOL bars as caution signs when trading within ranges.
2. Relative Strength Index (RSI):
Combining RVOL with RSI can help filter overbought or oversold conditions and assess the
validity of market moves.
Overbought/Strong Trends:
If RSI > 70 and RVOL is green, the market may be in a strong uptrend, but it could also indicate an overbought condition.
Wait for confirmation like price consolidating or reversing before entering trades.
Oversold/Strong Reversals:
If RSI < 30 and RVOL is green, it signals potential buying interest in a downtrend, indicating a reversal might be near.
Usage Example:
Use a 14-period RSI for overbought/oversold levels.
Look for green RVOL bars in these zones to confirm momentum shifts or trend continuation.
3. Support and Resistance Levels:
RVOL works well to confirm breakouts or reversals at key support and resistance levels.
Breakouts:
If the price breaks above resistance with RVOL green, it indicates strong buying activity supporting the breakout.
A breakout with red RVOL may suggest a false breakout.
Reversals:
If the price bounces off support with RVOL green, it indicates strong buying interest, supporting a reversal.
Usage Example:
Plot key support/resistance zones.
Use green RVOL bars as confirmation for valid breakouts or rebounds.
4. Candlestick Patterns:
Combining RVOL with price action and candlestick patterns adds confidence to entries and exits.
Bullish Patterns with High RVOL:
A bullish engulfing pattern or hammer with green RVOL suggests a high probability of reversal or continuation in an uptrend.
Bearish Patterns with High RVOL:
A bearish engulfing pattern or shooting star with green RVOL indicates strong selling pressure and potential reversal in a downtrend.
Usage Example:
Identify patterns near key levels.
Confirm with green RVOL to validate the signal.
---
Customization:
You can modify the Volume Period and RVOL Threshold based on your trading strategy or timeframe. For instance, scalpers may use a shorter period for quicker signals, while swing traders may prefer a longer period for more reliable insights.
---
Disclaimer:
This indicator is provided for informational purposes only and is not intended as investment advice. Trading involves significant risk, and the use of any technical analysis tool should be part of a comprehensive strategy. The Relative Volume (RVOL) indicator does not guarantee future results, and past performance is not indicative of future outcomes. Users should carefully consider their financial situation and risk tolerance before making any trading decisions. The creator of this indicator is not responsible for any losses or damages that may result from its use.
The Relative Volume (RVOL) indicator helps traders assess the strength of current market activity by comparing the current volume to the average volume over a specified period. This indicator is useful for identifying significant volume spikes, which could indicate potential market moves like breakouts or reversals.
---
Key Features:
VolumeComparison: The indicator compares the current trading volume to the average volume over a defined number of previous bars (default 20 bars).
Threshold Highlighting: The indicator visually highlights when the current volume exceeds a defined threshold (default 1.5x the average), helping to spot periods of heightened market activity.
Color-Coded Bars:
Green Bars: Indicate that the current volume is above the threshold, suggesting increased market activity.
Red Bars: Indicate that the current volume is below the threshold, suggesting normal or low activity.
---
Customizable Inputs:
Volume Period: Defines the number of bars over which the average volume is calculated.
RVOL Threshold: Sets the level at which volume spikes are highlighted.
---
How to Use:
1. Spotting Volume Spikes: Look for green bars, which indicate that the current volume is significantly higher than usual. This could be an early sign of a potential breakout or other major market movement.
2. Analyzing Trends: If volume is consistently above the threshold, it may indicate strong market interest or momentum. Conversely, if volume remains low (red bars), it could suggest a lack of conviction in the current price action.
3. Fine-Tuning: Adjust the Volume Period to fit the specific asset you’re analyzing. A shorter period may be more responsive to recent volume changes, while a longer period provides a smoother, more stable average.
---
Combining RVOL with Other Indicators:
1. Moving Average (MA) or Exponential Moving Average (EMA):
RVOL can be paired with moving averages to confirm trends or identify potential reversals.
Strong Trend Confirmation:
Bullish Case: When RVOL is green (above the threshold) and the price is above the MA/EMA, it suggests strong buying momentum.
Bearish Case: When RVOL is green and the price is below the MA/EMA, it indicates strong selling momentum.
Weak Market Signals:
If RVOL is red (below the threshold) while the price hovers near the moving average, it may suggest indecision or weak trend strength.
Usage Example:
Apply a 50-period EMA for trend direction.
Look for green RVOL bars to confirm price breakouts from the EMA.
Use red RVOL bars as caution signs when trading within ranges.
2. Relative Strength Index (RSI):
Combining RVOL with RSI can help filter overbought or oversold conditions and assess the
validity of market moves.
Overbought/Strong Trends:
If RSI > 70 and RVOL is green, the market may be in a strong uptrend, but it could also indicate an overbought condition.
Wait for confirmation like price consolidating or reversing before entering trades.
Oversold/Strong Reversals:
If RSI < 30 and RVOL is green, it signals potential buying interest in a downtrend, indicating a reversal might be near.
Usage Example:
Use a 14-period RSI for overbought/oversold levels.
Look for green RVOL bars in these zones to confirm momentum shifts or trend continuation.
3. Support and Resistance Levels:
RVOL works well to confirm breakouts or reversals at key support and resistance levels.
Breakouts:
If the price breaks above resistance with RVOL green, it indicates strong buying activity supporting the breakout.
A breakout with red RVOL may suggest a false breakout.
Reversals:
If the price bounces off support with RVOL green, it indicates strong buying interest, supporting a reversal.
Usage Example:
Plot key support/resistance zones.
Use green RVOL bars as confirmation for valid breakouts or rebounds.
4. Candlestick Patterns:
Combining RVOL with price action and candlestick patterns adds confidence to entries and exits.
Bullish Patterns with High RVOL:
A bullish engulfing pattern or hammer with green RVOL suggests a high probability of reversal or continuation in an uptrend.
Bearish Patterns with High RVOL:
A bearish engulfing pattern or shooting star with green RVOL indicates strong selling pressure and potential reversal in a downtrend.
Usage Example:
Identify patterns near key levels.
Confirm with green RVOL to validate the signal.
---
Customization:
You can modify the Volume Period and RVOL Threshold based on your trading strategy or timeframe. For instance, scalpers may use a shorter period for quicker signals, while swing traders may prefer a longer period for more reliable insights.
---
Disclaimer:
This indicator is provided for informational purposes only and is not intended as investment advice. Trading involves significant risk, and the use of any technical analysis tool should be part of a comprehensive strategy. The Relative Volume (RVOL) indicator does not guarantee future results, and past performance is not indicative of future outcomes. Users should carefully consider their financial situation and risk tolerance before making any trading decisions. The creator of this indicator is not responsible for any losses or damages that may result from its use.
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