Stock volume analysis
for every day stock trading
How stock market volume analysis
can help to make more money
in any online stock trade
I like to use stock market volume as a powerful confirming technical indicator. Why ? This is the only indicator that isn’t calculated from price!
High level of shares traded during a trading day indicates important market action. There is also very good to monitor overall stock market volume of shares traded on NYSE , NASDAQ or your preferred stock market exchange. It can help you to recognize todays stock market situation. It is good to understand when to be aggressive trader and when to be conservative in opening new positions. You have to pay closer attention to stock or market action when you see high levels of this technical indicator during these situations: - Stock is breaking from significant level of support or resistance
- Stock is bouncing from significant level of support or resistance
These two situations are important for us because they tell us that a new trend is developing. You want to enter trade during these days when it is confirmed by intraday monitoring of
important levels.
Entry price should be as close to this important S/R level as possible. Here are two chart examples:
The MYGN chart above is a nice example of breakout of resistance level with very high volume. Above average level of trading action (approx. five times more than average) allows stock to rise almost four points in one day (almost 10%) Next example:
Do you see the arrows pointing to important levels of traded shares and when it happened? - high level when bouncing from support level
- high level during breakout of trendline resistance
- high level during bounce from support
- breakout of horizontal resistance with above average level of trading action
But you can also find above-average levels of shares traded in situations when the trend is already running. After several strong moves you see that last day is accompanied by high value of traded shares. This is warning sign. When I’m trading and see such a situation on my real-time chart, I like to take these two steps:
- sell or cover part of my shares into strength (1/3 at least)
- move my stop closer
Very strong trading after several trend days means that big players are trying to exit their positions into the hands of latecomers. My favorite trader Tony Oz calls them bagholders:-)
They will buy from us and allow us to realize a nice profit. Watch this GS stock chart:
You can see extreme level of traded shares at the end of a strong decline. This is a level where fear is big. Most professionals use such days to move their short positions into the hands of the bagholders.
Stock market volume tip
Use a simple
moving average
to define the average level of trading action in monitored stock or stock market index. Put this average line into your chart, and then you can easily spot above-average levels daysI use 20 days SMA on my stock charts. You can see it above.
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