Trading Volume - What Does It Mean And How To Use It?
Volume is a great indicator that points to whether the security is going through momentum or not. Its calculation does not include price action factor in its formula, while all other indicators are derived from price action, making it a very reliable indicator to confirm other signals.
The relationship between the number of goods sold and the number of goods bought holds true in any market, not just the stock market according to the theory of supply and demand. Just as shortage of goods will cause prices to rise, the shortage of a desired stock cause traders to desire it more and when those who control the stock demand higher prices and buyers are willing to pay that price, prices will rise. The prices in a stock market go up and down similar to the action of a bouncing ball. If more people want to buy a stock (demand) than people who want to sell it (supply), then the price moves up.
Contrary to that, if more people wanted to sell a stock than buy it, prices move down (decrease) there would be greater supply than demand, and the price would fall. Decreasing demand fuels declining prices. Lower prices spur demand. As demand picks up, people begin buying again, fueling the need for greater supply. And the cycle goes back to the beginning, in a bouncing ball fashion.
It is clear that Supply and Demand control human psychology which turns a complete cycle to affect supply and demand.
As we have seen, prices move, like a bouncing ball, between two levels. These two levels are identified as Support and Resistance. To perform technical analysis for a particular stock, in so many cases, Support and Resistance levels have to be determined making this information crucial for your trades. Some investors focus on the volatility in the stock market to profit from it by trading between these two levels. The importance of Support and Resistance is derived from information about the direction of the market so that traders are able to plan their trades. When the investor lacks experience, it is important that education and reliable source of information be tapped in.
You have to be careful for the signs that show the changes in the market. If price and volume are different from the prevailing trend is frequent, you have to be prepared for the change.
It is not mandated that you have to monitor the market every single day, but it is essential that the prevailing trend of the market is monitored to notice any indication of an upcoming market direction reversal or a side-way trend is about to start. - 23212
The relationship between the number of goods sold and the number of goods bought holds true in any market, not just the stock market according to the theory of supply and demand. Just as shortage of goods will cause prices to rise, the shortage of a desired stock cause traders to desire it more and when those who control the stock demand higher prices and buyers are willing to pay that price, prices will rise. The prices in a stock market go up and down similar to the action of a bouncing ball. If more people want to buy a stock (demand) than people who want to sell it (supply), then the price moves up.
Contrary to that, if more people wanted to sell a stock than buy it, prices move down (decrease) there would be greater supply than demand, and the price would fall. Decreasing demand fuels declining prices. Lower prices spur demand. As demand picks up, people begin buying again, fueling the need for greater supply. And the cycle goes back to the beginning, in a bouncing ball fashion.
It is clear that Supply and Demand control human psychology which turns a complete cycle to affect supply and demand.
As we have seen, prices move, like a bouncing ball, between two levels. These two levels are identified as Support and Resistance. To perform technical analysis for a particular stock, in so many cases, Support and Resistance levels have to be determined making this information crucial for your trades. Some investors focus on the volatility in the stock market to profit from it by trading between these two levels. The importance of Support and Resistance is derived from information about the direction of the market so that traders are able to plan their trades. When the investor lacks experience, it is important that education and reliable source of information be tapped in.
You have to be careful for the signs that show the changes in the market. If price and volume are different from the prevailing trend is frequent, you have to be prepared for the change.
It is not mandated that you have to monitor the market every single day, but it is essential that the prevailing trend of the market is monitored to notice any indication of an upcoming market direction reversal or a side-way trend is about to start. - 23212
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posted by X - Men @ 1:36 AM
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