The Role Of the volume đïžđ
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#DontMiss_Ellon_Mask #ellonmask How to trade it
Volume can be integrated into various trading strategies:
Volume and Breakouts: When a stock breaks above a resistance level (or below a support level) on high volume, it's often a valid signal that the breakout is genuine. This can be an opportune time for a trade.
Example: If a stock has been trading between $10 and $12 and suddenly breaks above $12 on significantly higher volume than the recent average, it might indicate strong buying interest and a potential continued upward move.
Volume Climax: A sudden spike in volume after a strong trend might indicate a climax or exhaustion move. This can be a sign of a potential trend reversal.
Example: If a stock has been steadily climbing and then sees a sharp upward move on very high volume (much higher than previous days), it could suggest a buying climax and potential for a pullback or reversal.
On Balance Volume (OBV): OBV is a momentum indicator that uses volume flow to predict changes in stock price. It adds volume on up days and subtracts volume on down days. A rising OBV suggests that volume is flowing into an asset, while a falling OBV indicates outflow.
Volume Divergence: When price and volume diverge, it can signal a potential trend change. For instance, if price is rising but volume is decreasing, it could suggest a lack of conviction in the upward move and a potential reversal.
Example: A stock reaches new highs, but the volume starts to decline with each new high. This divergence can be a warning sign that the uptrend may not be sustainable.
When using volume in technical analysis, it's essential to always use it in conjunction with other indicators and tools. No single indicator should be used in isolation.
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