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

READING VOLUME

Volume is not always easily deciphered. Is the market trying to tell us something when an exceptionally low volume occurs in a single day, or when an exceptionally high volume was transacted recently? A single volume bar by itself will not be meaningful. Volume is always analyzed in conjunction with the price movement of a stock as it develops with the market’s changing activity. Volume is the key to evaluating price directional movement and shows the market’s ability to facilitate trade. It serves as a gauge of the strength of market development and shows when such money-flow is either increasing or slowing down.

Under normal market conditions, volume tends to expand and contract with the price trend; the movement of price and volume should be similar progression. During the upward price movement, volume should expand; and during the downward price movement, volume should contract. We use volume to assess the strength and health of the prevailing trend. The specific number of a single volume bar is not important and the interpretation of volume should not be based only on a single daily bar. Volume should be studied in perspective with its recent action. Volume as an indicator will often be more meaningful when average volume is used (see Figure 5.4).

FIGURE 5.4 The middle window shows the plots of the 2-day and 10-day averages. The bottom window shows the plots of the percentage ratio of the 2-day and 10-day averages. Notice that the expansion and contraction ...