4 Facts About Volume.

4 Facts About Volume.

 

Volume is crucial for identifying the strong and weak moves in the market. By analyzing volume properly, we can identify who is controlling the market (bulls or bears).

 Let’s discuss the major facts behind the volume.

 

1.what is volume?

2.How Does Volume Help us?

3.What is Aggressive Buying and Aggressive Selling?

4.How Volume Helps to Identify the Strong Move and Weak move?

 

What is volume?

The volume showcases the total number of shares traded (Bought and Sold). It is the total transaction in a particular time period.

Example: If john buys 4 shares and Ram sells 4 shares the total volume is 4 at that particular time.

 

How Does Volume Help us?

Volume measures the commitment behind a stock’s price movement.

Volume helps to identify Buying pressure or Selling pressure is increasing or decreasing.

The Volume also Showcases liquidity. If the stock has good liquidity it is easy to get into the trade and get out of the trade.

It showcases strong and weak moves, so if the volume is high depending on the candle formation, we can identify the move up/down is strong or weak.

 

 Few Facts about Volume

 There is no such thing as more buyers than sellers or more sellers than buyers.

For example: if I buy 4shares Ram sells 4 shares the volume is 4.

 

For every buyer, there needs to be a seller, and for every seller, there needs to be a buyer. For example, you might have bought it from an Institution and sold it to another person. 

 

Then why the stock goes up or down?

Ask -Bid

Trading is like an auction house, we have two sides in an auction house, there are is bidders on one side (buyers) and we have sellers known as Ask on the other side. Since there is no such thing as more buyers and sellers, there is something that exists called aggressive buyers and aggressive sellers.

The buyers who are willing to buy at a higher price is the aggressive buyer. The sellers who are willing to sell at a lower price is the aggressive seller.

 

What is considered high and low Volume?

Every stock has a different amount of average volume. Which is known as relative volume (RVOL). The relative volume showcases how current volume is compared to past trading volumes over a given period.

Example:  Suppose the Stock “A” has an average volume of 1 million and if the volume increases to 3million we can say relative volume is high, which is a good sign.

The higher the relative volume is the more in play, it is because more traders are watching and trading it.

 

Things to Remember;

Strong wide-body Green Candle + High Volume (Increasing) = Strong Move Up.

Strong wide-body Red Candle + High Volume (Increasing) = Strong Move Down.

Strong wide-body green candle + Low volume (decreasing) = Weak Move Up.

Strong wide-body Red Candle + Low volume (decreasing) = Weak Move Down.