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Volume Based Technical Analysis
Why Volume Analysis?
Volume Indicators Quotes
When you look at a chart for a major market index such as the S&P 500, you see only a history of the price paid for a basket of stocks. What you
don't see is the total volume for the entire S&P 500 minute-by-minute or
even day-by-day. What you don't see can hurt you.
Why is volume a trader's best friend?
Below you will find a few points why volume based technical is consider as
one of the most important part of trading and why professional and institutional
traders always pay attention to volume in their analysis.
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Volume offers
a complete picture of the market. You have to remember that there is
no price movement without volume. If the volume is equal to zero (no trades
occurred) the a security's price remain unchanged at the close price of
previous transaction (when volume was not equal to zero). The price movement
is always accompanied by volume and single price analysis delivers only a
half of the picture. Only analysis of volume and price together can provide
complete and truthful picture of e trend.
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Volume can
help determine the health of an existing trend. Price analysis helps
to determine the current trend, however, by itself it does not help you to
see how strong the trend is. When it comes to the evaluating health of a
trend only volume and advance/decline (Breadth) indicators may help you to
spot periods when the trend is weak and can change its direction.
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Specialty
volume for indexes and volume-based
technical analysis are very good
indicators for predicting index shifts. Volume of the indexes and
exchanges is considered one of the best source for analysis and predicting
trend reversals. Averaged by the sum of volume of all listed stocks, index
volume is less volatile than volume of a single stock, furthermore, it is
more accurate in analysis and prediction.
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Volume is the
indication of supply and demand. The
technical analysis of volume is
a basic yet very important element of market timing strategy. Volume
is defined as the number of units
traded during a specified time period. If a price trend tells you what is
stronger on the market (supply or demand) at the current moment, only volume
may tell you how strong supply or demand is (how strong panic selling or
greedy buying is). Only volume may signal about weakening in supply or
demand and possible changes in the supply/demand balance and market
sentiment, thus revealing possible trend turnovers.
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Volume based technical analysis shows the reversal points of the market,
and therefore when to buy and sell!
Currently when
a change in sentiment and trend occurs in the market, most traders (investors) don't find out
about it until it is too late. This usually happens due to the lag in majority
technical indicators. Lagging indicators follow the trend and the lag,
especially when it set to be big for conservative trading, could be costly to an investor.
In opposite, leading indicators, including indicators based on volume,
predict possible changes in the trend. Trading volume as one of the few
leading technical indicator offers investors an invaluable tool to know when and where a change in
sentiment is going to occur, and act accordingly.
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Volume tracks the actions of Big Institutional Traders. One
of the most important aspect of volume analysis is analysis of volume
surges. Volume during the price decline helps you see where a stock is being repeatedly bought as it dips
in big amounts (big number of transactions) by institutional traders. Likewise, towards the end of a rally,
a wide volume surge often signals that the
institutional traders are dumping their stocks at since the move is at an end. If you weren't aware of it before, you should be starting to
see why volume is a trader's best friend.
Additionally, unlike many indicators, volume is applicable to every
timeframe. How can this be? Simple: volume is a measure of sentiment.
Fortunately for us, human nature is the one ever-present constant of the stock
market. Never forget that fact. Once you have your own emotions under control as
a trader, knowledge of this profound fact will guide you ever after as reliably
as the Northern Star guides a lone sailor across a vast sea.
For the first time anywhere, MarketVolume® offers a
complete picture of the market. Not only do we supply you with
up-to-the-minute index prices on a variety of major market indicators, we
also show you the minute-by-minute trading volume. It is this volume that
shows the reversal points of the market, and therefore when to buy and
sell!
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Terminology
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QQQQ
Signals
Past 6 Months |
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10%
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20%
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Compound |
Compound
Margin |
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As of 3/19/2010 |
Buy / Sell Trading signals.
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