User:Altafqadir/Volume (technical analysis)

In the commodity market volume refers to the number of contracts and in the stock market it refers to the number of shares that are traded over a specified period. The transactions are the result of meeting the demand with the supply. A greater demand increases prices and when supply exceeds demand, prices tend to fall. Volume existing during a downtrend or decline is considered as supply volume and volume existing during an uptrend or an advance is termed as demand volume. Any major correction in price can change apace the demand and the supply.

Price and volume data do reflect the activities of jobbers, institutions, big players, investors, informed players, general buyers and sellers. It is observed that rising prices accompanied by rising volume is more bullish and falling prices by falling volume is relatively bearish.

Why is there a need to understand volume? It is considered as a measure of supply and demand and, of course, there is a relationship between prices and volume. An understanding of volume patterns act as a third dimension in technical analysis.

How the volume is graphically presented? Space for volume entries is provided in a secton above the dates. The traditional way is in the form of a bar chart directly beneath the price chart. It can also be looked as a continuous line beneath the price. For some analysts, day to day volume is not as important as the deviation from the current average volume, 10-day, 20-day, 30-day moving averages are quite helpful in conclusions and judgements.

U/D volume: Another method to determine is finding the ratio between the daily up volume to the daily down volume. It is a fifty-day ratio that is determined by dividing the total volume on those days when the stock closed up from the prior day by the total volume on days when the stock closed down.

A buying climax which is extremely difficult to identify, is defined as a slow down in the rate of price appreciation accompanied by a sharp increase in volume. Classically, it occurs near a market top preceeding a major bear market. An increase in the rate of price decline accompanied by s sharp rise in the volume is known as a selling climax. It is observed that this phenomenon has frequently occured near the of major bear markets. There is a possibility that during selling climax total volume may exceed any single day's volume during the upswing as panic selling sweeps through the commodity or stock.