Trading volume and the essential strategies to use
The important strategies to be used for trading volumes
The number of shares which are sold and bought every day in a particular financial instrument which are called the volume, tend to be one that way which is accurate to gauge the money flow as the brokers with ZAR accountdoes. If you are new in the market, the money flow is normally utilized by traders to determine the overall demand and supply characteristics or an instrument of finances in an attempt of predicting each future direction.
The high volumes are all about the interest which is heightened in the name, and in case it is combined with a move which is higher in share price, then it might be utilized as a signal of an upward momentum which is strong. To keep an eye on volume will ensure that you are on the correct side of the trade. Each of the indicators below utilizes volume as the main input and give you a view which is practical on the way to incorporate volumes in the trading strategy.
Taking a close look at the volume
When in September 10, 2013 there was a large volume spike in the Delta Air Lines Inc., the DAL, because of an announcement that the company was joining the S&P 500 stock market index. The move that is strong will make the stock price to go higher, combined with a volume spike, suggested that there was an interest that was renewed in the stock and marked the start of a strong move higher.
Generally, it is believed to be the best for aligning a surge that is strong in the volumes which have a shift that is strong in the fundamentals of the company. In the Delta case, the extra to 500 S&P suggested that the large mutual funds and index funds would be extra positions. It might add an extra layer of demand that is underlying which will then push the price to go higher. Screens for the spikes in the volumes that would be brought this stock to the active traders attention.
It is an indicator which is mostly referred to as OBV, utilized in finding stocks which have experienced sharp increases in volume without a change that is significant to the price of the stock. When the institutional investors begin to buy shares, one of the main goals to refrain from having to push the price that are higher so that they can keep their average price at entry as low as you can.
That is the point that it becomes extremely useful in utilizing the OBV indicator. Before you dive into the example, it is important that you note that the indicator ends up being calculated through adding volume to the previous OBV value when the most recent price for closing tends to be lower than the closing price previously, then the volume is then subtracted from the OBV value previously.
An example is based on the MSFT – Microsoft corporation chart where the price that trended in late 2013 and the early 2014 sideways which was between 34.80$ and 37.00$. You check the trend carefully, you will be able to notice that the indicator of the OBV trended higher sharply during this particular period. The increase in the OBV is suggestive that the traders became bullish while on the stock and the screens of the stock for the rising OBV values ended p allowing the traders who were active to get an early rise to 41.11$ before.
Volume by price
It is another common strategy which utilizes volume. In majority of the cases, volume is normally spotted at the bottom of the chart. In such cases of the price by volume, it is indicated on a chart vertically, so that the trader can be able to get a rough idea regarding the number of volumes that has been traded at different points in prices.
The levels which happen to have high volumes can be used to identifying areas that the smart money has been actively pursuing a position. The strong volume moves at a price point that is key are normally used by the active traders in identifying key areas of resistance and support, and can be able to generate strategic selling and buying signals that are combined with the other indicators.
There are some companies during the trading of 2014 like the ABC – AmerisourceBergen Corporation which was between 71.50$ and the 73$ as it was identified by the price indicator. In the event that the broad market tends to sell off, the traders would end up with the stock to find some support near the 73$ mark. You have to observe how there will be little volume that is likely to happen between 74$ and the 76$ due to the gap. Traders are likely to expect little or no support at all from the buyers during these areas in case there will be a pullback.
The bottom line
Volume is believed to be one of the greatest and most important indicators that is utilized by traders who are active for the money flow gauging. From the above examples, the indicator which is derived from the use of volume like the on-balance volume and the one for volume by price can be utilized in coming up with trading strategies which are lucrative.
It is known to be an idea that is smart which combine trading signals which are generated by changes in volume with a shift that comes from the fundamentals of the company. If you have stock screens which are simple which can identify securities with changes that are sharp in volumes, they might be the best candidate for the traders who are out looking for coming up with a watch list.
Embrace what you think is the right strategy and utilize it in ensuring that you trade in volumes for a profit. With the brokers with ZAR account, chances are that, you are going to create profit in the shortest time possible and you will be on your way to being among the super traders.