Stock Trading’s Real Story: Price or Volume?
A consistent change in the market trend is shown by the rising and falling of volumes. Though, price is equally important.
Volatility and big moves in the market are triggered by a lot of activity and volume. If high volume accompanies any price movement, it is more important. A trader’s decisions are influenced by the market fluctuations and their actions are reflected by the volume.
Volume and price movement helps the trader know the liquidity level of a stock and how easy it will be to get into or out of a position close to the current price, even a moving target. This rise or fall shows a consistent change in market trend.
Volume affects price movement based on the market situation. Increased trading volumes leans towards buy orders while upon dropping, it’s an appropriate time to sell. Low to high volumes refer to strong buying. When big companies step into the market, the stock price rises with their big orders.
Thus, it is important for both the trader and the investor to do volume analysis and understand price-volume. This can help get a sense of strength or conviction behind advances and declines in specific stocks and market. But it has to be looked at relative to recent history.
Price action and volume indicators are also entry and exit signals. Traders should keep an eye on price movement as that determines profits or losses. Usually, traders formulate day-trading strategy depending on price movements and then use volume-analysis to check improvement in performance.
Volumes are taken as a confirmation tool as it goes with the conviction investors have in a trend. So, it’s an exaggeration to say that volume gives real details and not price. Both are actually equally important and need to be considered while trading in security.