Volume Analysis: The Market's Truth Detector 📊
Pro Insight
Volume is like the heartbeat of the market - it tells you how healthy a price move really is! 💪
Understanding Volume Basics​
Volume represents the total number of shares or contracts traded during a given period. Think of it as the market's energy level!
Volume Indicators​
1. On-Balance Volume (OBV)​
- Cumulative total of volume
- Shows if volume is flowing in or out
- Leading indicator for price movements
2. Volume Profile​
- Shows trading activity at different price levels
- Identifies key support/resistance levels
- Reveals price levels where most trades occur
3. Volume Weighted Average Price (VWAP)​
- Average price weighted by volume
- Used by institutions for large orders
- Key reference for day traders
Volume Patterns​
1. Volume Climax​
- Extremely high volume
- Often marks major market turns
- Shows exhaustion of trends
2. Volume Divergence​
- Price makes new highs/lows
- Volume doesn't confirm
- Warning sign of trend weakness
Common Mistakes
- Don't just look at absolute volume
- Compare to average volume
- Consider time of day
Volume Analysis Checklist​
- Compare to average volume
- Check for divergences
- Look for climax volumes
- Confirm price patterns
- Consider market context
Practice Exercises​
- Track volume on major moves
- Compare volume across timeframes
- Practice identifying divergences
- Study volume at support/resistance
Pro Trading Tip
The best trades often come when price and volume tell the same story! 🎯