How To Find The Volume Of A Stock

How to Translate Book on a Stock Nautical chart

The volume on a stock chart is probably the most misunderstood of all technical indicators used by swing traders. There is but a couple of times when it is actually even useful. In fact, you lot could trade whatever stock without even looking at it!

Commencement a definition:

Stock chart volume is the number of shares traded during a given fourth dimension menstruum.

Ordinarily plotted equally a histogram under a chart, volume represents the interest level in a stock. If a stock is trading on low volume, and so there is not much interest in the stock. Only, on the other paw, if a stock is trading on loftier volume, then at that place is a lot of interest in the stock.

Book only tells the states the emotional excitement (or lack thereof) in a stock.

Liquidity

Stock chart book too shows us the amount of liquidity in a stock. Liquidity just simply refers to how easily it is to arrive and out of a stock.

If a stock is trading on low volume, then there aren't many traders involved in the stock and information technology would be more difficult to find a trader to buy from or sell to. In this case, nosotros would say that it is illiquid.

If a stock is trading on high book, and so in that location are many traders involved in the stock and it would be easier to detect a trader to buy from or sell to. In this case, we would say that it is liquid.

Permit's expect at a couple of common volume patterns on a stock chart:

volume on a stock chart

A surge in volume can oftentimes signify the end of a trend.

Hither, on the left side of the chart, this stock begins to fall. Book increases dramatically equally more and more traders get nervous nigh the rapid refuse of this stock. Eventually everyone piles in and the selling force per unit area ends. A reversal takes place.

So, in the eye of the chart, book begins to taper off (circled) every bit traders begin to lose interest in this stock. At that place are no more buyers to push the stock college. A reversal takes identify.

And so, on the right side of the chart, volume begins to increase again (second arrow) and another reversal takes place.

This chart is a good case of how the trend of a stock can reverse on loftier volume or low book.

Mistakenly, some traders think that stocks that are "upwardly on high volume" means that there were more buyers than sellers, or stocks that are "downwardly on high book" ways that there are more sellers than buyers. Wrong! Regardless if it is a high volume day or a low volume solar day there is still a buyer for every seller.

Yous tin can't buy something unless someone is selling information technology to you and you can't sell something unless someone is buying it from you!

Volume and price

Then if all volume represents is interest in a stock, when is it useful? The simply time volume is useful is when you combine it with toll. For example:

Expansion of range and high book - If a stock is globe-trotting along sideways in a narrow range and all of sudden it breaks to the upside with an increase in range and book, then nosotros can conclude that there is increased interest in the stock and it volition probably continue college.

Narrow range and high volume - If a stock has very loftier book for today only the range is narrow then this is called churning. In this case, significant accumulation or distribution is taking place.

Always heard the proverb, "volume precedes price"?

Many times you will see book pick upward right before a significant movement in a stock. You tin can see that interest is building. On a stock chart, look for volume to be higher than the previous day. This is a sign that there may be a pregnant move to come.

Take a look at this example...

chart of volume precedes price

This stock rallied for 3 days in a row on relatively low volume. Then, on the 4th mean solar day, volume increased dramatically. This increase in volume began the move to the downside.

Interpreting volume on a stock chart tin be confusing! Just recall that the toll action is the well-nigh important factor on a nautical chart.

All else is secondary.