Trading won’t work unless you know THIS Indicator

Summary

The video explains how relative volume (RVOL) can help traders judge whether a price move has meaningful participation behind it. The speaker uses RVOL to assess momentum and breakouts—not as a standalone buy signal or a substitute for price-based setups.

• RVOL compares current volume with a stock’s usual volume at the same time of day. For example, 5 million shares versus a typical 1 million would be 5× normal volume.
• Raw volume can be misleading: 10 million shares may be unremarkable for a stock that typically trades 50 million, while 2 million can be unusually high for one that typically trades 200,000.
• Abnormal volume can indicate increased attention, potentially related to news, earnings, sector activity, technical levels, or institutional and day-trader participation. RVOL alone does not establish the cause.
• Higher participation can make widely watched levels—such as VWAP, the previous day’s high, premarket high, and opening-range levels—more meaningful. It does not guarantee a breakout will succeed.

Cumulative RVOL Approach

The speaker describes a cumulative RVOL histogram built as a Thinkorswim study with help from Claude. It compares volume accumulated so far that day with the stock’s historical volume over the same period:

• The top histogram compares current activity with the 20-day average.
• The bottom histogram compares it with the 5-day average.
• The goal is to track whether participation is growing, holding, fading, or absent as a move develops—not to predict future prices.
• The speaker says the concept can also be applied using other RVOL tools, including those available through DAS or Finviz.

Examples and Figures Cited

• MRNA (Moderna): A major catalyst and gap-up were accompanied by exceptionally high RVOL on both the 20-day and 5-day comparisons. The speaker treats this as evidence of attention, range, and liquidity—and a reason to watch the stock, not a reason to buy indiscriminately.
• ETHA (Ethereum ETF): The price broke above a base or resistance area around $44 with rising volume. On the 2-minute chart, increasing RVOL accompanied the move, which the speaker presents as breakout confirmation.
• “SpaceX” example, weak breakout: The subtitles identify a level around $155. Price briefly broke above it, but the 20-day and 5-day cumulative RVOL readings were below 1, indicating below-normal volume for that time of day. The breakout failed.
• “SpaceX” example, stronger confirmation: At approximately the same $155 level, RVOL rose to just over 2 on the breakout and then held around 1.7–1.8. The stock subsequently moved to about $175 over the next few days. The speaker says sustained, above-normal participation helped confirm the move. (“SpaceX” is the name used in the subtitles.)

Trading Framework and Cautions

Before taking a breakout, the speaker asks:

• Is the stock “in the game”—showing abnormal volume and sufficient attention?
• Is participation increasing as price approaches or clears the level?
• Does RVOL hold after the move and during a pullback?
• Is price continuing to advance while participation fades?

The speaker may then look for a specific setup, such as a premarket-high breakout, VWAP continuation, opening-range breakout (ORB), or a later-entry continuation setup. High RVOL is a cue to pay attention, not a blind-buy signal; the trade still needs a setup. If price looks constructive but RVOL does not confirm, the speaker advises greater caution. RVOL also cannot make every trade successful.

Assets, Indicators, and Concepts Mentioned

• Tickers and instruments: MRNA (Moderna), ETHA (Ethereum ETF), and “SpaceX” (as identified in the subtitles)
• Asset and sector references: Ethereum, biotech and pharmaceuticals, and sector activity generally
• Tools: Cumulative RVOL histogram, Thinkorswim, DAS, and Finviz
• Trading concepts: VWAP, premarket high, previous-day high, opening-range breakout, opening momentum, third-day breakout, pullbacks, and catalyst-driven trading

Disclosures and Sources

No explicit “not financial advice” disclaimer appears in the subtitles. The presenter is an unnamed speaker associated with SMB Capital.

Sources and tools mentioned: SMB Capital, Claude (used to help create the Thinkorswim study), Thinkorswim, DAS, and Finviz.