Gessel says that IBD looks for stocks that are ending a period with little or no price change and make a big price move on high volume. One benefit of volume is that it can give you signals of what the major institutional investors are doing. “It’s how we spot new up-trends as well as corrections before they are widely known.” “Price and volume are the key to IBD’s market analysis,” says Gessel.
#HIGH VOLUME BUT NO PRICE MOVEMENT HOW TO#
O’Neil, chairman and founder of IBD and author of the best-selling book, How to Make Money in Stocks. The CAN SLIM system was developed by William J. He describes how price and volume are woven into the CAN SLIM investing system, a top-performing strategy recognized by the American Association of Individual Investors (AAII). Volume, combined with price, is “critical to spotting emerging trends,” says Chris Gessel, executive editor and chief strategy officer of Investor’s Business Daily. There are dozens of systems to interpret volume data into trading signals, here is how volume plays into a couple of popular systems: the CAN SLIM ® investing system and The Wyckoff method. Volume reflects demand, but doesn’t always tell you if it’s coming from buyers or sellers, or from large players or small. The challenge, she cautions, is interpreting the data.
It can show extreme enthusiasm or extreme fear and panic.” Toni Turner, an independent trader and best-selling author of A Beginner’s Guide to Short-Term Trading (Adams Media, 2008), says that she has had made more trading profits “by concentrating on reading volume than on any other indicator. With the right interpretation, volume can be a way to read the mood and psychology of the market, discover the strategies of large investors, and put price changes in context. However, while analysing volume one should use certain guidelines in determining strength and weakness of a move.See how two trading systems use volume to better understand price changes.įor traders and investors, volume does more than measure how many shares are changing hands between market participants within a given time period. That’s why, for a security to remain in an uptrend, the volume of the security should ideally increase along with price. For example, if trading volume increases in a particular session, prices generally move in the same direction. Trading volume can help an investor in identify momentum in a security and confirm a trend. By using the average, for example 10-day average, one can get a fair idea of the available liquidity on the counter. Volume can change drastically from few thousands to lakhs on any particular day. Unlike stock prices, trading volume can also move up and down sharply within a short time. Investors frequently use trading volume to confirm the existence, or continuation of a trend or trend reversal. Trading volume is considered a solid technical indicator, because it represents the overall market sentiment around a security or the market. It is one of the most closely watched indicators after price action. The overall market activity in a security gets reflected in trading volume, which indicates investor interest and how they perceive an asset at a given point of time. Along with stock price action, trading volume can be one of the most significant technical parameters to determine where a stock may be heading.