Importance of Volume Online Stocks
When it comes to trading stocks online, learning to evaluate changes in trading volume can ultimately determine whether trades are profitable or not. What must be realized is that when volume moves in or out of a stock, it usually indicates how mutual funds and institutions feel about the stock.
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Increasing Volume On Rising Prices
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Whenever a stock price rises on increasing trading volume, it is a bullish sign. Many traders wait for a stock to break out of a sustained price pattern on above-average volume. And the stock will usually experience several subsequent high-volume days on rising prices after the breakout.
Increasing Volume On Declining Prices
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Whenever stock price drops on increased trading volume, it is a bearish sign. Since bear markets are usually driven by panic, it is common that prices fall quicker than they rise. A stock that has shown an initial sell-off on high volume will usually experience several subsequent high-volume days on declining prices.
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Increasing Volume During Market Tops And Bottoms
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It is never a good idea to trade on predicting market tops or bottoms, but it is good practice to anticipate them. This is done by watching the trading volume of a stock whose price has stalled after a bullish or bearish move. The trend could be over if the price doesn't change after four or five days of high trading volume.
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References
- Photo Credit Stock Market image by Paul Heasman from Fotolia.com
