Having lots of knowledge is extremely useful when you trade stocks and stock shares. The more you know, the more informed decisions you can make. A positive indicator for traders is unusual volume trading. Why is that? When a lot of excess trading happens, something significant typically occurs.
Here’s the trick: How do you discover unusual volume without looking at many charts? A stock screener is one way. It’s a quick time-saver that allows you to discover stocks with significant changes in trading volume.
In this guide, we will discuss:
- What is an unusual volume, and why is it significant to you?
- How to use relative volume to spot these opportunities.
- A step-by-step guide to screening stocks using a stock screener for this purpose.
- How do you know whether the signal is strong or is merely noise?
Let us begin.
What is anomalous trading volume?
There are a lot more shares of stock trading than normally would be. A stock that would normally have 500,000 shares trading daily now has 2 million shares trading daily. That is a large jump. Something caught people’s attention, and we have to figure out why as traders.
Large volume changes typically occur due to:
- Earnings announcements
- News or speculation about large companies.
- Mergers and acquisitions
- Insider buying and selling
- Large institutional trades
And why is that? It’s because prices typically move when a large number of shares are being sold or bought. When numerous individuals are selling or buying a stock, something significant is probably occurring.
Comprehending Relative Volume
Traders use relative volume, or RVOL, to discover unusual activity. It indicates how the current volume is different from the typical volume.
Here’s the formula:
Relative Volume = Current Volume ÷ Average Volume
Example:
- Current share volume is 1,000,000.
- On average, 250,000 shares are traded over 50 days.
- Relative Volume is 1,000,000 / 250,000, which is 4.0.
The stock is purchased and sold 4 times more than normal.
Why use a stock screener?
You can’t review many charts alone. A stock screener may assist you by locating stocks which fit into what you’re searching for. You can, for instance, instruct it:
- Relative Volume is greater than 2.0.
- Price exceeds $10.
- Market Cap above $500M
That way, you only view the stocks you are interested in.
Using a Stock Screener to Spot Unusual Volume
Here’s a simple process:
Step 1: Initiate a stock finder
Choose a good screener that allows you to filter by volume and other key factors.
Step 2: Select the Proper Filters
- Set the Relative Volume greater than 2.0 to locate stocks with at least twice their normal activity.
- To view liquid stocks, create a price filter for those that are more than $10 in cost.
- If you wish to be more specific, you may add more filters, such as industry, market size, or technical indicators.
Step 3: Writing the List Down
Now, order the list from most frequently bought and sold to least frequently bought and sold, beginning with the most frequently traded stocks.
Step 4: Examine the Chart
Click on a stock to view details:
- Is there a significant increase in volume?
- Is the price increasing or decreasing significantly?
- Is there a candlestick pattern indicating breakouts or gaps?
Step 5: Speaking with Other Signs
Merely glancing at the figure is not enough. Consider this:
- Moving averages (50 days, 200 days)
- RSI to avoid overbought or oversold conditions
- News—if there is a valid reason for the behavior or not
Why are price changes difficult to comprehend
Not every jump is a massive price increase. The volume is often due to individuals selling in panic or massive companies divesting cash. At times, it could be short covering.
That’s why context comes into play. Do not trade by volume alone; seek other indications.
Ways to find the best opportunities
- Watch pre-market activity because early volume often predicts big moves during the day.
- Check options activity because unusual options volume often signals institutional bets.
- Always watch the news because rules or security issues can generate a lot of activity.
For instance, recent reports such as IBM’s 2025 Cost of Data Breach Report show how AI security threats are influencing businesses and can impact the stock market. Likewise, the UK preparing to ban ransomware payments could create volatility in cybersecurity stocks.
Errors to Avoid
- Purchasing low liquidity penny stocks simply due to volume.
- Coming too late after the peak of volume declines.
- Always place a stop-loss to control risk.
Conclusion
When there’s unusual volume, it usually indicates that people are paying close attention to a stock. You can easily find these opportunities using a stock screener and save time by not having to review charts. Just make sure to combine volume analysis with price action, technical indicators, and actual news events before you initiate a trade. Stay concentrated, keep current, and utilize surprise quantities to assist you.
