welcome to the investors trading academy talkingglossary of financial terms and events. our word of the day is “volume indicatorsâ€volume-based indicators represent another important group of indicators used in technicalanalysis. they help us to spot even very small changes in volume traded in the market, whichoften precede a trend reversal. information yielded by these indicators is most valuableduring the last stages of a trend.
How Do I Apply For A Zimbabwean Passport In South Africa, the notion "volume" denotes the overall amountof contracts (stocks, currency lots or futures) that was traded in the market during the givenperiod of time. volume can be viewed according to selected timeframe, i.e. we can view thevolume traded for one minute, one hour or one day.technical analysts view volume as an indicator,
which informs us about the pressure on changeof the price. if volume is high, the pressure to change the price in direction of the currenttrend is high, which implies that the trend will probably remain in effect for some time.on the other hand, when volume is low, pressure to change the price is low as well, whichmeans that the current trend will probably end soon.this theory is based on the premise that higher volume traded in the market means that moretraders are willing to execute their trades at the current prices. they either believethat current pricing of the contracts is correct or that the trend will still remain in effectfor some time. conversely, if the volume is low, there are only few people willing toexecute their trades at the current prices,
which means that they either believe thatthe current pricing of the contract is inadequate or that the trend is going to reverse soon.this implies that the volume should be rising and be higher when the price is moving inthe direction of the trend. for example, if there is an upward trend in the market, thenthe volume for the days when prices were rising should be higher than for the days where priceswere falling. if this is not the case, a divergence between volume and price exists. such a divergenceoften precedes the end of the trend. volume-based indicators can be just like thevolume considered both leading and confirming indicators. this means that they can detectchanges in the trend even before they manifest themselves, but they can also be used to confirmor reject signals generated by other indicators
or technical analysis methods.besides, many traders believe that volume precedes the price. according to this idea,every significant move in price should be preceded by either a rise in volume if a newtrend is emerging or a fall in volume if the trend is ending.
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