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Technical Analysis of Gaps: Identifying Profitable Gaps for Trading by Richard J. Bauer, Julie R. Dahlquist

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Chapter 6. Gaps and Volume

The previous chapter focused solely on price movement. Price is always the most important variable studied by a technical analyst. After all, it is a change in price that enables a trader to profit. This chapter adds another variable, volume, to the analysis. Volume is simply the number of shares traded over a specific time period, usually a day.

Volume is the oldest confirming indicator used by technical analysts. In 1935, H.M. Gartley provided general rules regarding how to interpret volume.1 Basically, Gartley suggested that price change on high volume tends to occur in the direction of the trend, and price change on low volume tends to occur on corrective price moves. During an uptrend, higher volume is taken as ...

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