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Volume Explained: How Small-Cap Runners Really Move (Dollar Volume + Float Rotation) — Transcript

by Small Caps Trading Podcast · 3,669 words · 497 segments · language en · Watch on YouTube

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0:00Volume is one of the misunderstood
0:02concepts in small cap price action
0:04analysis. You can hear it used a lot in
0:07all kinds of ways, but at the end of the
0:09day, nobody could actually tell you what
0:12volume means what to your trading or to
0:16this runner or to your setup. Because
0:18the truth is that number one, volume is
0:21a proxy for participation and liquidity,
0:23not for direction. And also, that it's
0:27just one part of the puzzle. So, if you
0:29want to know what's actually going on in
0:32a stock from a volume perspective, and
0:35what it might mean for the chances of
0:37this stock to keep going or to fade or
0:40whatever, then what you need to do is
0:42you need to equalize volume across
0:45runners and add a second layer that you
0:48can cross-reference it with. So, what do
0:51I mean by that? The way that you
0:52equalize volume across all runners is
0:55obviously through dollar value. So,
0:58yeah, sure, track volume and get to know
1:00what volume does, but also keep top of
1:03mind the actual amounts of dollars
1:05traded per runner. Because that is the
1:09actual value of volume. So, you could
1:12see stuff trading millions of shares,
1:15lots of millions of shares, but when you
1:16turn it into dollars, that's when it all
1:19gets equalized. That's when you can see
1:21something like this, for example. This
1:24is a snapshot of what small caps did in
1:27this past week. And you can see that
1:29it's sorted by dollar volume. Each day
1:33is sorted by dollar volume. And we don't
1:35need to look at how many volume traded
1:38and what the price of the stock was to
1:40try and figure out if this was a lot of
1:42volume or a little bit of volume. Here
1:44you go, you could see it through dollar
1:45value, and it equalizes the value of the
1:48volume across all of them. Now, the
1:50second piece of the puzzle is float
1:52rotation. Float rotation tells you how
1:55many times the float flipped. So, for
1:57example, if Alure at the time of that
2:00run was 7 million shares, they since
2:03then diluted, I think they're 12 million
2:04shares, which was I think the point of
2:06that run. But, back then they were at a
2:09float of 7 million, and the float
2:10rotated 20 times, that means that the
2:13volume on that day was 140 million,
2:15right? So, at the time it was a 7
2:17million float, it traded 140 million
2:20shares, so it's rotated the float 20
2:23times. So, okay, now we've defined the
2:25two variables through which we look at
2:27volume. It's through dollar value and
2:29through float rotation. Now, let's talk
2:31about why and what to do with that
2:34information. What does it tell us? So,
2:36the idea is pretty simple. The higher
2:38the dollar value of a runner is, the
2:41more participation there is in the
2:43stock, the more it could go to bigger
2:46and bigger runs. And the same thing is
2:48true with the float rotation. Because
2:50the more times the entire float of a
2:52stock trades in a single day, the more
2:55that stock becomes just a trading
2:57vehicle and it detaches from anything
3:00fundamental. Which means that the more
3:02times the float rotates, the more this
3:05runner can go crazy. So, okay, so we've
3:08defined the baseline is the higher the
3:10dollar volume, the more the thing can
3:12run. The higher the float rotation, the
3:15more the thing can run. So, where the
3:17magic of the analysis happens is in the
3:20different combinations of those two
3:22variables. So, if you have, for example,
3:24something that traded a lot of dollar
3:26volume, but it's trading a low float
3:29rotation, then that is actually what we
3:31call in small caps trading thick.
3:35Because there's a lot of participation
3:37in there, but it's not actually rotating
3:40the float a lot, because, presumably in
3:43this scenario, the float would be very
3:45big. And so, that's a scenario that, as
3:48a long, you could be like,
3:50you know, not in it, maybe this one
3:52doesn't go crazy, maybe I, you know, I'm
3:53not going to put all my eggs in this
3:55basket. And as a short, you could look
3:57at that and be like, okay, this is sort
4:00of my prime target. It's something that
4:03has a lot of dollar volume, so that
4:05means you could, all you big traders out
4:07there, you could put a lot of size on
4:08that, but it might not run very far or
4:12go crazy, because it needs to flip the
4:14float a lot to go crazy, usually, and
4:17it's just There's only so much dollar
4:20volume that can go into a stock, right?
4:22So, a high dollar volume and a low float
4:24rotation is something that's good for
4:26shorts, not so great for longs. Now,
4:28going over some of the other
4:30combinations of these two variables, low
4:33dollar volume and high float rotation
4:35means the stock is very thin, and low
4:37dollar volume, low float rotation is
4:40just there's not a lot of information
4:42there to glean from that. Now, the way
4:44small cap runners usually work is that
4:46you're going to have sort of three
4:48baskets to look at every day, hopefully
4:51every day. You're going to have the
4:52really major high dollar volume, these
4:55are the main runners of the day, about
4:57100 million or more is going to fall
4:59into that category, depending on the
5:01cycle, but generally speaking, 100
5:03million or more is where the real
5:05activity lies. The second tier is sort
5:07of the mid tier, the
5:0950 million, give or take. Those had some
5:12participation, but it wasn't crazy. And
5:15then under that, you have a lot of the
5:17sort of the 20 million, the 10 million,
5:19the 5 million, those are the pop and
5:21drops. Well, usually pop and drops. And
5:24the way to look at that, just from the
5:26dollar volume perspective, before we go
5:28back again and connect the float
5:30rotation piece to it, is that the low
5:32dollar volume ones, by and large, they
5:35tend to be pop and drops. And so, as a
5:37long, you don't care about them. As a
5:39short, you sort of take those as the I
5:42don't really need a setup here, cuz a
5:44setup is not going to form, and I'm just
5:46going to sort of be front side on this
5:48and hope for a pop and drop. You mostly
5:51see those happen in two times of the
5:53day. Earlier mid pre-market, where
5:55they'll just pop and there won't be any
5:57follow through, and they'll just fade,
5:59and everybody will look at that as like,
6:01the easy fader, or on the long side,
6:03like the thing that bagged the out
6:04of you. Or, it'll be in the regular
6:06trading hours, where out of the blue,
6:08it'll start running, but then no follow
6:11through at all. The mid tier, the 50
6:13million plus minus, they do build some
6:16structure, some pattern, but because
6:19there isn't tons of participation, they
6:22don't tend to go very far. Sort of the
6:24median run for the sub 100 million
6:26dollar volume is in the 65%,
6:31you know, like that's where high of day
6:32is, is more more of around the 65%,
6:35maybe 70, whereas the over 100 million,
6:38their median run is higher than that.
6:40And the high dollar volume, we already
6:42spoke about that. Now, earlier I spoke
6:44about connecting the dollar volume to
6:46the float rotation in the really major
6:48dollar volume runners, and I think that
6:50that part is more obvious. But, you
6:52still have to do that to the mid tier
6:54and the low tier. And different
6:57conclusions arise depending on which
6:59tier you're looking at. What I mean by
7:01that is that if we're looking at the low
7:03dollar volume, well, quite honestly, the
7:06float rotation doesn't matter as much,
7:09because there just isn't a lot of
7:10participation. That being said, you
7:13should still apply the float rotation
7:15prism to it. Which is to say that the
7:18higher the float, the harder it'll be
7:20for this stock to run. Or vice versa,
7:23the lower the float, the easier it will
7:25be for this to run. But, if it's just
7:26not developing into anything beyond
7:28[clears throat] a few million dollars in
7:29dollar volume, then regardless of the
7:32float rotation, you have to look at this
7:34as a pop and drop, potentially. And
7:36that's sort of natural, because without
7:37a lot of participation, you don't have a
7:39lot of analytical resources at your
7:41disposal there. There's not a lot of
7:43data points to analyze. And when it
7:45comes to the mid tier, you do start to
7:47get a little bit more data points. So,
7:48the 50 million dollar, right, the sub
7:50100 million dollar volume, but over 20
7:53million. So, in the 50 million area.
7:56Over there, you look at the float
7:57rotation, and you say to yourself, okay,
7:59I'm in a mid tier, it's There's
8:00participation here, but nothing crazy.
8:03So, the same float {slash} float
8:05rotation rules apply, where where the
8:08bigger the float, the less you sort of
8:10expect this to go crazy, the lower the
8:12float, the more you say to yourself,
8:14okay, this could go crazy if it wanted
8:16to. And so, that's the primer on how to
8:19equalize volume and add another layer to
8:23it, the float rotation, to help you look
8:25at all runners in the same way, so
8:28you're no longer looking at the volume
8:30and feeling like you need to be some
8:31sort of a mad scientist that has to
8:33somehow use the actual absolute volume
8:37bars to decipher what's happening or
8:39what will happen from here. Now, I want
8:41to go back to this picture that I had up
8:43in the beginning of the video. And I
8:45want to explain what this picture is and
8:48how it connects to this subject. So, on
8:50the right side, we have the dollar
8:52volume, right? Here's stocks that traded
8:5410 million dollars or less. Here's 100
8:57million. Here's a billion. Here's 10
9:00billion. And on the left is how much
9:01they ran in a single day. Here's 100%.
9:04Here's 1,000%.
9:06Here's 10,000%. And if we look at the
9:08extremes, the ones that did the most
9:11amount of dollar volume, and the ones
9:14that ran the most amount of percentage,
9:16we're going to see some names that you
9:18should know if if you've been a student
9:19of this for the last couple years. Each
9:21one of them went on a massive multi-day
9:23run, so they each had a few days where
9:25the dollar volume was absolutely huge.
9:28But, you could see that the amount that
9:29they ran, percentage-wise, is actually
9:31not crazy, right? It's in the 100%. This
9:34is a logarithmic scale. I don't really
9:36know how to figure out how much percent
9:37this is, but, you know, it's in the 100%
9:40or 200% area, or whatever it is. They
9:43ran a lot, but their dollar volume was
9:45absolutely astronomical. Some of the
9:48highest dollar volumes that we have seen
9:50in small caps in the last year or two
9:51years. And over here, we have guys that
9:55both did a lot of dollar volume, right?
9:57In the hundreds of millions, in the
10:00billion, or even in the several
10:02billions, but they ran like crazy. They
10:06ran a thousand percent, two thousand
10:08percent. And that's going to be OCTO,
10:10which is now ORBS, which was one of the
10:13biggest black swans of 2025. It was a
10:15crypto treasury play when crypto
10:17treasury plays were at their hottest.
10:20CWD, same thing. And you're also going
10:23to see some of the most egregious China
10:26names in recent memory. TCGL, QQQ, etc.
10:30Now, what's the difference between these
10:33guys here that ran on high dollar volume
10:35and went to 10,000% or whatever,
10:38and these guys here that ran on the
10:40biggest dollar volume, but did only 100%
10:44or 200%? The difference between them is
10:47the float. Beyond open, these guys had
10:50gargantuan floats. And so, when the huge
10:54dollar volume came into these stocks,
10:56yeah, they ran a lot, but a lot compared
10:59to their float. So, they ran a lot, but
11:01not out of this world. However, when
11:04OCTO, which was back then like a two
11:06million share float, got billions and
11:10billions of dollars in dollar volume on
11:12a single day, or CWD, same thing, was a
11:16one million or two million float, got a
11:19billion or two billion dollar volume in
11:22it in a single day, they ran to the
11:24moon. And so, it's that difference there
11:27that you need to understand that sort of
11:29dictates the way you look at the
11:31relationship between dollar volume and
11:34float rotation. So, you have to know the
11:36brackets of the dollar volume. You know
11:38that the sub 20 million is just pop and
11:40drops. Between 20 to 100, they're like
11:43sort of, you know, the mid plays of the
11:46day. And over 100 million, and
11:47particularly over a couple hundred
11:49million, that's when you know you're in
11:51the real major plays of the day. And you
11:53constantly cross-reference it with
11:55rotation. And looking at those two
11:57things gives you a clue as to
12:00potentially how far this thing can run,
12:02or maybe the opposite, right? That it
12:05you don't think that it will be able to
12:07run very far. Now again, everything is
12:09cycle dependent, and you have to
12:10remember that. But let's look at some
12:11recent random examples. I'm recording
12:14this on a Saturday. ONMD ran on Friday,
12:16yesterday. It closed at 70 cents the day
12:19before, which means that it has the 15
12:21cent halt bands. And it traded over 200
12:24million shares, which seems like a lot,
12:26right? Now, let's apply the dollar
12:28volume and float rotation prism to it,
12:31and add a couple of other variables, cuz
12:33no one trick is ever going to help you
12:35in trading. You have to look at a lot of
12:37things together, right? But today we are
12:38focusing on the volume part. So, ONMD is
12:41a 20 million floater, which is a pretty
12:43decent size float as far as pennies go.
12:46It's not huge, it's definitely not
12:47small. It's bigger than your normal
12:49penny stock runner. But ultimately,
12:51throughout this day it flipped the float
12:5311 times. 11 times is respectable, but
12:55it's not crazy. If you go back to the
12:58list we looked at earlier of the runners
13:00each day, you're going to see that
13:02similarly to how dollar volume has three
13:05tiers to it, float rotation also has
13:07three tiers to it. There's the sub 10
13:10time float rotation, there's the 10
13:12times to around 20, 25-ish, I want to
13:15say. And then there's all the stuff
13:17that's over 25 times the float in a
13:19single day. So, stuff that's rotating
13:21the float less than 10 is on the small
13:23side for runners. And ONMD rotated the
13:25float 11 times. So, what we have here is
13:29a high dollar volume, cuz it did 260
13:31million. It was the second largest
13:33runner of the day dollar volume wise. It
13:35did 260 million dollars, but it rotated
13:39the float just a medium amount of times,
13:4111 times. And so, if we go back to how
13:44we spoke about looking at things, we
13:45have a high dollar volume, but a medium
13:48float rotation. Not necessarily a small
13:50float rotation, because if the rotation
13:52was under 10, then it would really be
13:55not a good look for the longs, and a
13:56really good look for the shorts. But it
13:58rotated 11 times. So, it's medium. So,
14:02what that's telling us is that this
14:03thing is trading a bit thick. Now, if
14:05you add to that the fact that this was a
14:07sub 70 cent close, and it has the 15
14:10cent halt bands, and you come and you
14:12take a look at the stock, and you say,
14:14"Okay, the float on it is a bit on the
14:16higher side for the price that it is.
14:19The float itself is not rotating too
14:21many times. It's a tight halt bander,
14:24but it's not threatening halts at any
14:26point. Plus, it's trading 260 million
14:29dollars, or it's trading a lot of
14:30millions of dollars, depending on what
14:32time of day you're looking at it, right?
14:33260 million was by the end of the day.
14:35But all of those signals should tell
14:37you, "Okay, this thing is thick." And
14:39so, if you're a long, maybe you don't
14:41really want to play this as a day trade.
14:43If there's a reason to play it long as a
14:45swing trade, that's fine. But from a day
14:47trading perspective, if you're a long,
14:49this is not the instrument that you're
14:50looking for. And conversely, on the
14:52short side, if you're the kind of short
14:54seller that I am, which I don't like to
14:56be a hero on the thin stuff. I don't I'm
14:58not crazy about trading the thin stuff,
15:00then this might be a good situation for
15:02you, because it doesn't have a high
15:04chance of going crazy. You had your
15:06volume exhaustion over here, clear as
15:08day, right into here. And the rest of
15:10the day just kind of gave you a lower
15:12high area. Yeah, it didn't want to give
15:14up the lower high, so it stayed in a
15:16tight range. But that's still a very
15:19comfortable trade for a short. You have
15:21the lower high right here, and then you
15:23have the couple times that it tried over
15:25it. And you can see that the volume
15:27popped off at those areas. So, it was
15:29sort of like telling you exhaustion. But
15:31it never went too far to begin with, so
15:33the range was a bit on the tight side
15:36generally. Look, it ran 100%. That's
15:39nothing to scoff at. But this is a thick
15:41trader, and this is how you can use
15:44dollar volume and float rotation to see
15:47that. Let's take a look at another thick
15:49trader, and then let's look at some thin
15:50traders. So, let's take a look at XWEL
15:52on the daily chart. It's been running.
15:54XWEL is a five million floater, which by
15:57the way, coming from a penny stock,
15:59which is where it was, makes it a very
16:02small float.
16:04Cuz five million float for a penny is
16:06small. And so, because of that, when a
16:08lot of volume was introduced to it on
16:11this day, it had 350 million shares
16:13traded, which at a view up of slightly
16:16over a dollar, or whatever it was, came
16:18out to 420 million dollars in dollar
16:21volume traded. So, it was a small float
16:24that had a lot of dollar volume in it on
16:26its day one, and the float rotation was
16:29very high. It was 70. So, it rotated the
16:32float 70 times. Now, we're in a week
16:34cycle, so it didn't run a lot.
16:37It ran from 35 cents
16:41to a dollar 55, which is 320%,
16:45and it was one of the highest, if not
16:47the highest percent runner of the week,
16:49exactly because you got a low float with
16:52a lot of float rotation. And so, this is
16:55actually the definition of thin, and it
16:57was thin on day one, but it kept going.
17:00And so, on Friday, on this day over
17:01here, it became thick. Why do I say it
17:04became thick? Because on Friday it kept
17:06going to higher prices. So, it came from
17:0935 cents, and now it's at the low to mid
17:11two dollars. But it was doing it on
17:14lower volume. So, on this day it flipped
17:16the float only 13 times. There was 125
17:20million dollars traded on that day, and
17:23it flipped the float 13 times. Now, that
17:25still caused it to go higher, but at
17:28this point it was trading thick. Now,
17:30there is sort of a fundamental aspect to
17:32all of this that you should know, which
17:33is that after this run happened, they
17:35put out a PR that they're going to
17:37complete dilution on this day. And on
17:39this day they didn't complete the
17:40dilution, so shorts were getting
17:43squeezed. Some longs were smart enough
17:45to long into that. But the problem is
17:47that at the end of the day, it traded
17:49very thick, because the dollar volume
17:51was decent, but not crazy. The float
17:54rotation was low. The float rotation
17:56wasn't high. It was already on a
17:58multi-day run. So, you ended up getting
18:00the same action here as we saw earlier
18:04on ONMD, except because this is already
18:06on a multi-day run, then there's much
18:09more range there between the low of 35
18:12cents and the high of two dollars. So,
18:14instead of being stuck in a range all
18:17day, and eventually giving you a bit of
18:18a fade like ONMD did, this one did not
18:21spend a lot of time in the
18:23consolidation. It started dropping and
18:25dropping. So, that in a nutshell is how
18:28to look at volume in an actual helpful
18:30way. Dollar volume equalizes all the
18:33volume for you, so that you know how
18:35much participation there actually is in
18:37a stock, but it doesn't tell you much
18:39about the potential just yet.
18:41Cross-reference it with the float
18:43rotation, and that tells you how thick
18:46or thin the stock can be. And that does
18:49give you probabilities whether this
18:51thing can run or not run a lot. And
18:53separately from that, remember that the
18:55low dollar volumes don't really develop
18:58much of a structure. So, while it's good
19:00to be aware of the float rotation for
19:02those as well, those you primarily just
19:04simply look at as pop and drops, for the
19:06most part. I hope that was helpful. We
19:09got a little Discord room you can come
19:11join and talk about that stuff if you
19:12want to. I'll see you in the next one.

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