Volume is one of the most crucial stock nautical chart indicators used past market analysts to assess a given stock or alphabetize’due south supply and need situation. In this article, yous volition get the critical knowledge to help you interpret stock price action.
What is Stock Volume?
Stock volume is the count of the number of shares traded in a given time menses, usually daily for a typical chart. For any trade, there is a buyer and a seller; the stock volume is a count of the number of shares exchanged betwixt a buyer and a seller. Stock volume is the count of shares traded, not the dollar value of the shares exchanged.
What is Volume in the Stock Market?
On boilerplate, in 2021, 50 billion stocks were traded every calendar month, and the total number of shares traded was over 650 billion for the S&P 500 index. During times of stock market place volatility, for example, in 2008, the book of stocks traded topped 1.three trillion for the yr.
What does Volume Mean in Stocks?
Book in stocks refers to the total number of shares traded. If ii one thousand thousand shares are traded in a solar day, the mean solar day’s trading volume is 2 1000000. Importantly, this means that 2 one thousand thousand stocks change easily from heir-apparent to seller. It is not the total value of the stock traded; it is the number of shares traded.
What is the Volume Stock Chart Indicator?
The Volume indicator on a stock chart is usually expressed as a series of vertical confined on the Ten-axis of a nautical chart. If 20,000 shares were traded, then the bar will evidence 20,000. The changes in book from day to day indicate that a stock is more in demand if the book bar rises and the stock toll increases or less in demand if volume drops on price decreases.
Is the Volume Indicator Important?
Yeah, volume indicators in technical analysis are considered important. Combining the stock price motility with the increases or decreases in volume provides an insight into the supply, demand, and sentiment of the marketplace participants. Of import volume indicators are Volume Bars, Equivolume, and Volume at Price.
For example, the stock price going up and the volume is going down indicates fewer people are ownership at a college price. This means a change in need and a potential change in the direction of the stock toll.
Invest in yourself! Get all our courses & strategies for 50% off
★ Liberated Stock Trader Pro Stock Investing & Trading Form ★
★ Thou.O.S.E.Southward. Market Outperforming ETF Strategy ★
★ LST Beat out the Market Stock Picking Strategy ★
★ Exclusive Bonus Course – The Stock Market Crash Detector Strategy ★
★ Fully Guided Videos, eBooks & Lifetime Email Support ★
★ 108 Videos + 3 Full eBooks + 5 Scripts for TradingView & Stock Rover ★
Stock Chart Volume Color
Volume bars on a stock chart can be configured to be either red or dark-green. The bar’s colour indicates if in that location was a positive volume or negative volume for the time period. A cherry-red book bar indicates that the close price for the fourth dimension period was lower than the open price. A green volume bar indicates that the close price was college than the open toll.
What is Dark-green Volume on Stock Charts?
If you come across a green volume bar in a stock chart, information technology ways that the stock price for the selected time period has a close price higher than the open toll. This means the volume was positive; essentially, the stock’south need exceeded supply, therefore pushing the price upward. Multiple green volume bars are a bullish indicator.
What is Reddish Book on Stock Charts?
If you see a scarlet volume bar in a stock chart, it means that the stock price for the selected time catamenia has a close price lower than the open price. This means the volume was negative, and the supply of the stock exceeded need, therefore pushing the toll downward. Multiple cherry volume confined are a bearish indicator.
Stock Nautical chart Volume Color Instance.
Await at the nautical chart below for NetFlix (NFLX). Please have a close look at volume and price and what they take in common.
The volume indicator is configured to show a Red Bar if the closing price for the stock is lower than the opening price significant “Negative Volume,” and green for days where the closing price is higher than the opening “Positive Book.”
Book in Stock Charts
Reading book on stock charts is simply understanding supply and need. Loftier volume on stock cost increases ways the stock is currently undervalued and is in demand. High volume on stock price decreases means that the stock might exist overvalued and is nether selling pressure.
Sometimes the volume indicator bar is so large; it usually indicates a change in the stock price trend; this brings united states of america to the topic of Blow Off Volume.
What do yous come across in the Book Chart?
- What happened to book when the price changed?
- What happened to the cost when the volume spiked?
Volume “Blow off Top” & “Blow off Lesser”
Now look at the chart beneath and read further for a description of the key concepts here. The chart maps Cost, Moving Averages ten & 30, and Volume (Red for Negative, Dark-green for Positive).
How to Read Volume in a Stock Nautical chart.
one. Look at Toll Direction & Volume Levels
Price Direction Changes Upwards, Surge In Volume
Here at point 1, nosotros see a huge change in the direction of price; it was proceeding in a downward direction, then suddenly there was a fasten in volume over 2 weeks; this is known as a “accident-off lesser.”
It indicates that a key toll has been institute, where the sellers have lost enough that they demand to sell the stock, and the buyers take seen the price decrease enough so that they encounter real value in the stock. Of grade, other factors contribute, like good news or earnings results. Whatsoever happened, book increased!
2. Notice if Price Direction Changes on Increased Volume
Cost Management Change Downwards, Surge In Volume
The stock here increases from $20 to $38 in the following three months, a
ninety% increase, but how would we know this was about to happen. Well, buying when the moving averages crossed over would accept been a good option; it would non take provided the total xc%, just it would have
produced 40%, which past anyone’s reckoning is an excellent event. However, here we meet a monster
“Blow off Top,”
the huge scarlet Spike; this is a powerful sign to sell as presently as possible.
From phase ii, nosotros see the stock move in a sideways pattern and eventually subtract back downward to $19; the ride is well and truly over. However, yous would not ain the stock, equally you would accept sold when the moving averages crossed.
The stock price starts to increase in mid-November 2008, merely book tells united states of america naught.
Indicators do not tell us something 100% of the fourth dimension, simply we need to recognize it when they practise. The moving averages cantankerous at $25, a adept time to purchase.
3. Look for High Book & Price Increases
Huge Book and Toll Increasing
Here we see massive buying; the volume goes through the roof. Important to notation is we are comparing book for the stock in comparison to its history. This is the second biggest volume surge of the year for Netflix and is significant.
Why did it take off? We should always seek enlightenment!
Information technology reported splendid earnings, and because of the recession, people were switching from ownership bigger ticket items such as Cars and Plasma TVs to staying at dwelling and renting movies. Netflix reported a massive increase in new members.
In the chart, this note shows that the price
What does this mean? This ways that the stock price in extended-hours trading was and so strong that the Opening Price on the following day was significantly higher than even the High for the previous 24-hour interval, thus showing a gap in the nautical chart’due south price pattern.
Warning: Some volatile stocks prove a lot of Gaps in price. While toll gaps might sound good when they gap upward, if they gap downwardly against you, then they are terrible. Avoid stocks with any history of potent negative gapping as gaps do non allow you to sell at the price you want to.
3 Step Analysis Summary
Volume is of import, and reading it should get second nature. When searching for winning stocks, we ideally should await for stocks with increased book, so we have more adventure of a quicker, less risky win.
A Volume Chart will e’er testify Red Confined when the stock price has decreased for the solar day and Green Bars when the cost rises for the day.
The Best Volume Indicator
While there are no “best” book indicators, there are 3 essential book indicators. The
Volume Bar indicator
is the near used and indicates supply and demand for a time menstruum. The
Volume at Price
indicator shows the supply and demand at a specific cost level. Finally, the
overlays the book onto the width of the price bar.
Which 1 is the best depends on what you lot are looking for?
one. Stock Market Volume Bars
The Book Bar Chart enables you lot to visualize the supply and demand for a given stock at a specific minute, hour, twenty-four hour period, week, or month. This is the virtually normally used volume indicator in the technical assay of stocks and bolt.
2. Volume at Price / Volume by Cost Indicator
The Toll at Book (VAP) chart displays a horizontal bar overlayed on the price chart to provide insight into the number of stocks traded at a specific price betoken. This shows you the potential supply and need variance or potential pivot signal at a toll level regardless of time.
3. EquiVolume Stock Marketplace Volume Chart
EquiVolume attempts to provide the solution of Volume at Toll differently. Instead of plotting volume in carve up bars, it is, in fact, incorporated into the price bars themselves. The wider the price bar, the more shares were traded during that menstruation. Information technology is an interesting concept that allows you to visualize volume and toll uniquely.
four. Combining VAP and Volume Confined
Perchance the best way to visualize book is past using the VAP indicator and the volume confined together on the same nautical chart. This enables you to see the volume at a specific toll signal and the volume along the timeline.
Become Book at Price Bars with Award-Winning TC2000 Charting Software
Y’all want to be a successful stock investor but don’t know where to start.
Learning stock marketplace investing on your own can be overwhelming. There’due south so much data out there, and information technology’due south difficult to know what’s true and what’s not.
Liberated Stock Trader Pro Investing Class
Our pro investing classes are the perfect way to larn stock investing. Y’all will learn everything you need to know nigh fiscal analysis, charts, stock screening, and portfolio building and so y’all tin can first edifice wealth today.
★ 16 Hours of Video Lessons + eBook ★
★ Complete Financial Analysis Lessons ★
★ vi Proven Investing Strategies ★
★ Professional Class Stock Chart Analysis Classes ★
Find Out More
What Does High Volume Mean in Stocks?
High volume in stocks can hateful two things. High volume when the cost is decreasing ways there are more sellers than buyers; a sell-off. Loftier volume when the stock cost is going up means there is a rally in the stock price, meaning more buyers than sellers, which increases need, and pushes the stock price up.
What is Good Volume for a Stock?
Try to stick to trading stocks with at least $1 million traded per day. That means Stock Price * Volume = $ Volume Traded. At that place is some other easy way to see if a stock has enough volume. If you see big gaps between the open and closing cost for any stock, information technology ways there is not enough liquidity in the stock. This means not enough volume for good liquidity.
Penny stocks ofttimes do not take enough volume. For example, if the stock toll is $1 and the volume is 5,000, that means only $5000 of stocks is traded in a single day; that is not a fair and equitable market.
4 Gilt Rules for Stock Volume
There are some important characteristics of volume and price in the marketplace. Information technology is all about the direction of price movement compared to the increases or decreases in volume. In short, it is about Buyers and Sellers.
i. Price Upwardly & Volume Upwards (PUVU)
Stock Price moves higher on increased volume. This is bullish as information technology shows u.s.a. that more participants are interested in selling the stock at college prices, and near importantly, more people are interested in buying the stock at those higher prices. In an uptrend, this signals the tendency will continue; in a downtrend, this signals a possible correction or change in the trend’s short-term direction to upwards.
2. Price Up & Volume Downwardly (PUVD)
In an uptrend, this is very bearish as it suggests that although prices are rise, in that location are fewer participants suggesting people are backing away from the higher prices. This also infers that the tendency is weakening. In a downtrend, it suggests a continuance of the downtrend.
3. Cost Down & Volume Up (PDVU)
In a downtrend, this signals that a modify in trend is likely; as nosotros saw with the “Accident off bottom,” there might be a huge selling climax, and so the trend adjusts from down to sideways or downwards to up. In an uptrend, this may indicate a crisis, panic selling, or simply when a stock is going out of favor. The pressure is on the sell-side, and to sell, they have to have lower prices. A stiff negative indicate!
4. Toll Down & Volume Down (PDVD)
In a downtrend, this suggests that the retreat is slowing or beginning to end every bit fewer people are interested in buying or selling the stock at these prices. In an uptrend, this may indicate the stock is stopping for a jiff or due to a pullback earlier continuing on its up trajectory. Book tends to trend in the same direction every bit the price trend, so PDVD besides suggests a continuation of the main downtrend or a pullback and possible continuation of an uptrend.
And then yous see not merely the price merely the direction of both toll and volume is important. This is where the Price Volume Indicators play an important role.
For the nearly comprehensive preparation on all major stock chart indicators and technical analysis, cheque out our PRO Preparation.
Stock Charts & Indicators Video
This was a lot of information, and it is an of import tool in your toolbox.
Are You Looking For Stock Investing & Trading Software? Here Are My Favorites.
software for trading
is TradingView considering it does everything well. It has backtesting, great charts, stock screening, and an active community of over 3 1000000 people sharing ideas, plus a free plan available globally.
software for investing
is Stock Rover, as it specializes in deep fundamental financial screening, research, and portfolio management. It is the ideal platform for dividend, value, and growth investing.
software for stock market news
is Benzinga Pro, with its super-fast real-time news engine, squawk box, and news impact ratings.
AI trading software
is TrendSpider which enables automatic design recognition for Trendlines, Candlesticks, and Fibonacci levels. Trade Ideas uses AI to generate loftier probability daily trading signals for automobile-trading.
is Motley Fool Stock Advisor, which has a proven track record of beating the market place with fantabulous stock research reports.
Read the Full Top 10 Stock Market Software Testing & Review