Saturday, January 28

A Brief Guide On Volume Indicators

Volume indicator analysis is one of the most important technical parameters that novice traders use to understand and confirm the trends and patterns of trading. Here is what a trader must know about high volume and low volume indicators.

High Volume

High volume in trading basically indicates more interest in the stock. Whenever a trader sees that the volume of the stock is high means that particular stock will have more buyers and sellers. When the stock is in an uptrend and there is also an increase in its volume as per the ongoing uptrend then the stocks will continue to go up for a period of time. The stock will therefore attract and have more and more buyers.

In the same way, when the stock is in downtrend and there is no increase in its volume as per the ongoing downtrend then the stocks will continue to go down for a period of time. That way more and more sellers will be interested in selling such stock.

Low Volume

Low volume in trading indicates the lack of interest in that particular stock. It can be better explained through the following example—

  • When the price of the stock is up and volume is also up, there will be assured buyers for the stock.
  • With the stock having high price but low volume, there will be weak hands buying it.
  • But when the price is low for a high volume stock, there will be hopeless buyers.
  • Lastly when the price and volume both are down, then there will be weak hands selling the stock.

The uptrend tends to reverse when stock is moving up but volume is falling as no buyers are interested in the stock. And similarly, the downtrend is revered when stock is moving down and volume is falling as the interest of the sellers gets reduced

There are many volume indicators that help in identifying the high and low volume of the stock. Undoubtedly, the analysis through the indicator is extremely important for traders and investors. Every trader should be aware of the best volume indicators and other analysis tools for improving trading practices.