Timing Solutions for Swing Traders: A Novel Approach to Successful Trading Using Technical Analysis and Financial Astrology

VOLUME

Volume is an important component of analyzing directional price movements. Its importance is often overlooked by traders because it is such a simple indicator. Volume is often the precursor of price trend. But volume by itself is not a signal for entry or exit of trades, and a single volume bar will not be meaningful if it is not compared with its recent historical patterns. During an uptrend, volume will rise with rising prices and fall during a correction.

Volume can also serve as a tool for guiding wave counts and in projecting extensions of waves. For example, in a fifth wave, volume generally tends to be less than that of the third wave. If volume is greater than that of the third wave, an extension of the fifth wave is more likely. In any bull market, volume tends to expand and contract with the momentum of price change. Toward the end of a corrective phase, a decline in volume often indicates a decline in selling pressure and a low point in volume often coincides with a turning point in the market.

The discrepancy between volume and price spread is another indication to watch for price reversal. (See Figure 2.2.) Rising prices with low volume signifies trend weakness and increased volume on falling prices points to further decline in prices. Heavy volume with narrow price spread at new highs alerts traders to heavy resistance from sellers, whereas heavy volume at new lows is probably a sign of buying support. Whether in an uptrend or downtrend, any price movement ...