{"id":1827,"date":"2010-01-11T16:43:34","date_gmt":"2010-01-11T11:13:34","guid":{"rendered":"http:\/\/www.niftylivecharts.com\/blog\/?p=1827"},"modified":"2010-01-11T16:43:34","modified_gmt":"2010-01-11T11:13:34","slug":"why-a-stocks-volume-is-important","status":"publish","type":"post","link":"https:\/\/www.niftylivecharts.com\/blog\/why-a-stocks-volume-is-important\/","title":{"rendered":"Why a stocks volume is important ?"},"content":{"rendered":"
The stocks volume is a second most important market indicator , it \u00a0plays a very important role in determining future price movements of a given stock.<\/div>\n
Volume is an indicator that you can put on your chart. \u00a0Unlike most indicators it is not developed by using a calculation. \u00a0It simply tells you how many times a given stock was traded within a given time frame.<\/div>\n
For example if the Stocks volume for the day was 1,500,000 shares that means 1,500,000 shares were sold by someone and bought by someone on that day.<\/div>\n
Now at first glance this could appear to be an utterly useless piece of information. \u00a0How on earth could knowing how many trades happened help you? I\u2019ll show you.<\/div>\n
Say stock ABC broke through a critical price level. \u00a0It was up 4% today. \u00a0That is a pretty nice move for one day. \u00a0 Also since it broke through a critical level we would expect it to go up even more in the near future.<\/div>\n
However let us also say that on that day 300,000 shares were exchanged. \u00a0On a normal day 1,000,000 shares are traded. \u00a0Volume was way below average for that day.<\/div>\n
That could mean all the big investors were not trading. \u00a0They could come in the very next day and decide they are bearish on the stock. They sell and cause a panic. So, the stock goes down the next day.<\/div>\n
This is why most investors will not buy a stock when it breaks a critical level unless volume is high. \u00a0Doing this we can be more certain that the majority of people think this stock will go up. \u00a0This offers a greater buy signal then the same signal without high volume.<\/div>\n
Also if a stock goes down with little volume it could mean the same thing. \u00a0The majority of investor were not trading. \u00a0When they come back they could see this stock and decide it is too low. So they \u00a0buy it \u00a0and the price goes up.<\/div>\n
Now this is not saying that if you see a stock go down and only had 1\/3 of its average volume trading to go out and buy it. \u00a0We do not know what the other 2\/3 of traders who normally trade this stock think about the stock. Why? \u00a0Because they didn\u2019t trade that day.<\/div>\n
For all we know the other 2\/3\u2019s will come in the next day and decide the stock sucks and sell it. \u00a0Then the price plummets even further.<\/div>\n
That is why traders should use volume only as a confirmation signal. \u00a0If you like a stock and it broke through a critical level with huge volume than maybe you can jump into that. \u00a0If that is what your system tells you. \u00a0 Just don\u2019t use volume as a solo indicator.<\/div>\n
<\/div>\n
<\/div>\n","protected":false},"excerpt":{"rendered":"

The stocks volume is a second most important market indicator , it \u00a0plays a very important role in determining future price movements of a given stock. Volume is an indicator that you can put on your chart. \u00a0Unlike most indicators it is not developed by using a calculation. \u00a0It simply tells you how many times […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_genesis_hide_title":false,"_genesis_hide_breadcrumbs":false,"_genesis_hide_singular_image":false,"_genesis_hide_footer_widgets":false,"_genesis_custom_body_class":"","_genesis_custom_post_class":"","_genesis_layout":"","footnotes":""},"categories":[1],"tags":[2901,918,523,5205,917],"class_list":{"0":"post-1827","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-general","7":"tag-stock","8":"tag-stock-market","9":"tag-stock-trading","10":"tag-stock-volume","11":"tag-stocks","12":"entry"},"_links":{"self":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1827","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/comments?post=1827"}],"version-history":[{"count":0,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/posts\/1827\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/media?parent=1827"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/categories?post=1827"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.niftylivecharts.com\/blog\/wp-json\/wp\/v2\/tags?post=1827"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}