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    2.4 Price Volume

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    hima
    The document discusses how price and volume data can be used together in technical analysis. A sudden jump in volume accompanied by a rise or fall in price provides a strong signal about the strength and likely continuation of the trend. High volume on a price increase indicates strong bullish sentiment, while high volume on a price decrease signals strong bearish control of the market. Price and volume alone do not provide clear entry and exit signals, but can be used to validate the strength of movements identified using other indicators and to determine when to hold or exit positions.

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    2.4 Price Volume

    Uploaded by

    hima
    74 views6 pages
    The document discusses how price and volume data can be used together in technical analysis. A sudden jump in volume accompanied by a rise or fall in price provides a strong signal about the strength and likely continuation of the trend. High volume on a price increase indicates strong bullish sentiment, while high volume on a price decrease signals strong bearish control of the market. Price and volume alone do not provide clear entry and exit signals, but can be used to validate the strength of movements identified using other indicators and to determine when to hold or exit positions.

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    The document discusses how price and volume data can be used together in technical analysis. A sudden jump in volume accompanied by a rise or fall in price provides a strong signal about the strength and likely continuation of the trend. High volume on a price increase indicates strong bullish sentiment, while high volume on a price decrease signals strong bearish control of the market. Price and volume alone do not provide clear entry and exit signals, but can be used to validate the strength of movements identified using other indicators and to determine when to hold or exit positions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    74 views6 pages

    2.4 Price Volume

    Uploaded by

    hima
    The document discusses how price and volume data can be used together in technical analysis. A sudden jump in volume accompanied by a rise or fall in price provides a strong signal about the strength and likely continuation of the trend. High volume on a price increase indicates strong bullish sentiment, while high volume on a price decrease signals strong bearish control of the market. Price and volume alone do not provide clear entry and exit signals, but can be used to validate the strength of movements identified using other indicators and to determine when to hold or exit positions.

    Copyright:

    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Download as pdf or txt
    of 6

    PRICE & VOLUME

    One of the most age old technical analysis tool is the simple tool of using
    Price and Volume data together. The simple yet powerful tool gives us very

    PRICE & VOLUME


    strong signals about the direction in which the asset price is moving. A
    sudden jump in volume with closing price moving in any particular direction
    gives a strong indication about the trend. Either it is associated with news or
    else it can mean strong indications about the trend.

    When there is a sudden increase in volume and it is not clearly associated


    with a news very specific to the asset, we can use volume jumps as reliable
    signals for strong trends. Whenever there is a price increase with very heavy

    HIGH VOLUME
    volume, we can say that at the moment the Bulls have a very firm grip over
    STRONG INDICATOR STRONG INDICATOR
    the market and the volume is validating that. We can expect in such a of increase in demand of decrease in demand
    scenario that the Bullish trend will continue as there is immense Buying
    pressure for them.

    Similarly, when there is sudden jump in Volume and is accompanied with


    falling asset prices, it means that the Bears have firm grip over the market. In
    such situation, if we are long on any particular asset, we should immediately
    square off our position as the Bears are expected to exercise control over
    the market. We see how Volume data is being used to validate the strength
    of the movement.

    LOW VOLUME
    WEAK INDICATOR WEAK INDICATOR
    of increase in demand of decrease in demand
    We see that such price and volume data does not give us clear and Entry and
    Exit signals. We will never take any trades purely based on this data.
    However, we will use these to validate the strength of movement using other
    indications. We will use these to square off our positions in case there is a
    movement in the opposite direction and we will use these to increase our
    conviction on positions that we are holding and hold them even longer. Pure INCRESING PRICE DECREASING PRICE
    price and volume data is one of the most fundamental data around which
    entire technical analysis is built. Let us see how they look in practice.

    ZEBRA LEARN | THE CANDLESTICK TRADER 58


    We see that the sudden increase in volume along with Bullish Movement indicates very strong Bull grip over the market. We will
    square off our positions if we are short on such assets. We will continue to hold long with added conviction if we are long on this
    asset using other indicators. However, we see we cannot enter any trade solely based on Volume Data.

    ZEBRA LEARN | THE CANDLESTICK TRADER 59


    These are all examples of volume increases. We see that in the first instance, if we were long the asset which is very likely, we
    would have instantly squared off the position. Second time around, we would have continued to hold our short position. Third
    time around, we see that we will not take any trade based solely on volume jump. We will hold if we were Long on the asset. Also,
    we will check if there was any news around this date that affected the company directly.

    ZEBRA LEARN | THE CANDLESTICK TRADER 60


    This is yet another example of Volume Jumps. We will continue to hold our long position with greater conviction if we had one
    here using other indicators.

    ZEBRA LEARN | THE CANDLESTICK TRADER 61


    We see how Price and Volume data is sending the occasional mixed signal. We will not be able to act on this data in any
    material manner. We can use volume data along with almost any other indicator or analytical tool to understand the strength
    of the trade. Volume data’s primary role is purely to understand the strength in the direction. With this, we end our discussion
    of Price-Volume data. One of the simplest yet most powerful analytical tools to conduct Technical Analysis. Let us now move
    on to next analytical tool.

    ZEBRA LEARN | THE CANDLESTICK TRADER 62

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