(reading time 4 minutes)
Volume is the number of shares of stock, bonds, options, or futures con tracts traded over a designated period (e.g., daily, weekly, monthly).
+ Advancing volume is the total volume for all stocks increasing in price; declining volume is the total for all stocks decreasing in price.
+ Volume reflects the intensity (strength) of a stock, commodity or index. Volume also provides an indication of the quality of a price trend and the liquidity of a security or commodity.
📶 What volume reveals about the market's strength? 📶
1) High volume means greater reliance can be placed on the movement in price than if there was low volume, because heavy volume is the relative consensus of a large number of participants.
2) High volume indicates an active market; in an active market, the spread between bid and asked prices is usually narrower.
3) High volume is often characteristic of the initial stage in a new trend, such as a breakout in a trading range. Before a market bottom, investor nervousness leads to panic selling, a characteristic of which is high volume.
4) High volume is also attributable to a market top when strong buyer interest exists.
5) Low volume often exists during an unsettled period, such as at a market bottom.
6) Low volume reflects a lack of confidence that is usually indicative of a consolidation period when prices are within a sideways trading range.
7) A sizable increase in volume may point to a breakout (start) or climax (culmination) of a move, which may be temporary or final. In a rare case, it may represent a shakeout.
8) Volume typically follows a trend, expanding on rallies and decreasing on reactions. Volume is useful in ascertaining how strong a change in expectations really is.
🎯The following guidelines apply to the study of volume: 🎯
+ The market is bullish if a new high occurs with heavy volume. A new high on light volume is deemed temporary.
+ A new low price with high volume is a bearish indicator. A new low on light volume is less significant.
+ A rally to a new price high on expanding volume but with less activity than the previous rally is questionable. It may point to a coming reversal in trend.
+ A rally on contracting volume is questionable. It warns of a possible price reversal.
+ If prices advance after a long decline and then go to a level at or above the previous trough, the indicator is bullish when volume on the secondary trough is less than the first.
+ If the market has been increasing for a while, an anemic price increase coupled with high volume is a bearish sign. After a decline, substantial volume with minor price changes points to accumulation, typically a bullish indicator.
✅✅ Specially for Beginners!!! ✅✅
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