![]() ![]() Technical indicators can be used to help you enter and exit trades. Now that you have a basic understanding of stock charts it's time to learn about technical indicators. Volume either supports or denies the legitimacy of price action. Stock volume is one of the primary indicators of confirmation. You have to use your mind and your own human judgment.Īs you look at charts please get used to looking at what volume is doing in relation to price. And no computer has ever been developed that can take in all the data and spit out winning trades. Looking at stock volume patterns alone will not take you where you need to go. At any time buyers and sellers can change their mind and cause the stock to move in an unexpected way and render your pattern completely useless. Remember buyers and sellers rule the market not technical indicators. The reason you should not treat them as law is because often times you will see prices trend on heavy volume and NOT continue in that direction. Traders often rely on patterns because they are assumed to increase the chances of success. The interpretation of that picture is entirely up to you. Without the conformation of volume it's very difficult to be sure of any price move or new trend.Īll stock price movement and volume patterns work together to paint a picture. ![]() This may be a sign of uncertainty and the gains may be short lived. When you have increased volume pushing prices higher (or lower) the message here is "usually" that there is a lot of support for the current price movement, and it's likely to continue.įor our example above the stock is trading higher on low volume. Stock Volume at the Start of a New Trend. When you see a particular volume pattern, you more or less are going to ask yourself, " What message is this telling me?" However, I'm only going to show you four common ones. There are many volume patterns that one can learn. Volume tells us the emotional excitement (or lack thereof) in a stock. And if a stock moves on high volume then many traders or investors are involved in that movement and it will be easier to find someone to buy from or sell to. If a stock moves on low volume then that means that relatively few people are participating in this movement. It lets you know how many people are involved in that move. Volume measures the commitment behind stock price movement. And volume is the heart of the market (I really want to go up, or I really want to go down). I consider price to be the mind of the market (I want to go up, or I want to go down). However, with most of your trades you're merely going to note how volume is behaving before you enter the trade. It can also be plotted on top of prices.įor the particular style of trading I'm sharing with you, we are going to use stock volume intermittently.įor certain trades it will be absolutely necessary for volume to behave in a certain way before you enter the trade. Volume can be plotted as a line, but is usually plotted horizontally as a histogram along the bottom of the stock chart. It's essentially how much buying and selling was going on within that period of time.įor instance, if we are looking at a daily chart of IBM and the volume bar shows 25,000,000 or 25M, that means that 25,000,000 shares of IBM stock was traded during the day. Stock volume is a measure of the number of stock shares that have been exchanged or traded within a specific period of time. Volume can often make or break your trade. It's important that you know what stock volume is because it either supports or denies the legitimacy of price action. Understanding Stock Volume: the heart of stock price movement. ![]()
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