Volume is simply the number of measurable units of a financial instrument that are bought (or sold) during a trading session. There are two ways of looking at the relationship between volume and price. In low-volume trading, it is often possible to move price a good deal, which means that low volumes can be associated with high price movements. Equally, low volumes might be associated with a flat market. With the same financial instrument, on another occasion, there might be a high volume of trading in a narrow price range, which means that many people agree that the price is correct. Similarly, a high volume could be associated with a wide price range, which means that there is less agreement on price but some urgency to transact. My conclusion is that there is no consistent relationship between volume and price movement, but volume/price patterns exist that do have predictive value. I will examine some of these later (so subscribe to get the latest update). A point about volume that needs to be appreciated is that it offers a measure of the urgency with which people wish to trade. For example, at market tops high volumes sometimes mean that wise money is leaving the market and the unwise entering.
What is volume
0 comments
Post a Comment