FoundationsMAD Academy0:54Indicators

When Relative Volume Misleads

One ratio that spots unusual activity quickly, and three ordinary ways it gives the wrong impression.

0:54 · 7 scenes

This lesson is part of a MAD Academy plan.

What the Lesson Covers

  1. 0:00Relative volume is the quickest way to spot unusual activity, and one of the easiest numbers to misread.
  2. 0:05The whole mechanic. Divide the shares traded today by the stock's usual daily volume. A three means three times the normal crowd.
  3. 0:13Failure one: the clock. By ten in the morning only a fifth of a normal day has traded. A flat comparison reads 0.4 on a day running at double pace.
  4. 0:23Failure two: a tiny base. Five times a twenty thousand share average is a hundred thousand shares. Five times eight million is forty million. Same ratio, very different day.
  5. 0:32Failure three: the stale window. One enormous day sits inside a thirty-session average for six weeks, inflating the base, then drops out all at once.
  6. 0:41What it never says. Every share has a buyer and a seller. A high reading counts the crowd and stays silent on which side is pressing.
  7. 0:49Check the clock, the base and the window before trusting the multiple.
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Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
Educational content only. MadStockAlerts provides market commentary, research, and educational content. It is not personalized investment advice, and nothing here is a recommendation to buy or sell any security. Trading and investing involve substantial risk, including loss of capital. See the Risk Disclosure and Customer Agreement.
When Relative Volume Misleads — MAD Academy Training Video · MadStockAlerts