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ALPHA Volume (Support)


Volume is the foundation of everything in trading as this is simply all of the buying and selling. Having a strong understanding of volume will give you the edge in every single trading situation. The advanced volume indicator helps identify confirmed changes in the direction of buying or selling pressure. As well as continuation of trends. The Volume moving average is another key identifier for “Volume Breakouts'' although not as reliable - this can be learnt more manually in looking for the Volume Trend Lines which help identify consolidation periods, the moving average can be utilised in the same way. After consolidation there is almost always a big movement. IF you can identify that direction first using other indicators then you will almost always catch a dump or pump.

Recommended Timeframe: 4hr, 1DayRecommended Supporting Indicators: ALL ALPHA’S
Alerts:BULL OPPORTUNITY - Bullish Volume Breakout/Trend ChangeBEAR OPPORTUNITY - Bearish Volume Breakout/Trend Change

BULL/BEAR OPPORTUNITY - Bullish & Bearish Volume Breakout/Trend Change




FEATURES1ST IN SEQUENCE VOLUME SPIKE

VOLUME SPIKES

VOLUME

VOLUME MOVING AVERAGE


VOLUME


Trading volume is a measure of how much of a given financial asset has traded in a period of time. For stocks, volume is measured in the number of shares traded and, for futures and options, it is based on how many contracts have changed hands. The numbers, and other indicators that use volume data, are often provided with online charts.

Looking at volume patterns over time can help get a sense of the strength or conviction behind advances and declines in specific stocks and entire markets. The same is true for options traders, as trading volume is an indicator of an option's current interest. In fact, volume plays an important role in technical analysis and features prominently among some key technical indicators.

KEY TAKEAWAYS

  • Volume measures the number of shares traded in a stock or contracts traded in futures or options.

  • Volume can be an indicator of market strength, as rising markets on increasing volume are typically viewed as strong and healthy.

  • When prices fall on increasing volume, the trend is gathering strength to the downside.

  • When prices reach new highs (or no lows) on decreasing volume, watch out; a reversal might be taking shape.

  • On Balance Volume and Klinger Indicator are examples of charting tools that are based on volume.

 

How To Use Volume To Improve Your Trading

Basic Guidelines for Using Volume

When analyzing volume, there are usually guidelines used to determine the strength or weakness of a move. As traders, we are more inclined to join strong moves and take no part in moves that show weakness—or we may even watch for an entry in the opposite direction of a weak move. These guidelines do not hold true in all situations, but they offer general guidance for trading decisions.

1. Trend Confirmation

A rising market should see rising volume. Buyers require increasing numbers and increasing enthusiasm in order to keep pushing prices higher. Increasing price and decreasing volume might suggest a lack of interest, and this is a warning of a potential reversal. This can be hard to wrap your mind around, but the simple fact is that a price drop (or rise) on little volume is not a strong signal. A price drop (or rise) on large volume is a stronger signal that something in the stock has fundamentally changed.

2. Exhaustion Moves and Volume

In a rising or falling market, we can see exhaustion moves. These are generally sharp moves in price combined with a sharp increase in volume, which signals the potential end of a trend. Participants who waited and are afraid of missing more of the move pile in at market tops, exhausting the number of buyers.

At a market bottom, falling prices eventually force out large numbers of traders, resulting in volatility and increased volume. We will see a decrease in volume after the spike in these situations, but how volume continues to play out over the next days, weeks, and months can be analyzed using the other volume guidelines.

3. Bullish Signs

Volume can be useful in identifying bullish signs. For example, imagine volume increases on a price decline and then the price moves higher, followed by a move back lower. If the price on the move back lower doesn't fall below the previous low, and volume is diminished on the second decline, then this is usually interpreted as a bullish sign.

4. Volume and Price Reversals

After a long price move higher or lower, if the price begins to range with little price movement and heavy volume, this might indicate that a reversal is underway, and prices will change direction.

5. Volume and Breakouts vs. False Breakouts

On the initial breakout from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in volume or declining volume on a breakout indicates a lack of interest and a higher probability for a false breakout. 

6. Volume History

Volume should be looked at relative to recent history. Comparing today to volume 50 years ago might provide irrelevant data. The more recent the data sets, the more relevant they are likely to be.

 Volume is often viewed as an indicator of liquidity, as stocks or markets with the most volume are the most liquid and considered the best for short-term trading; there are many buyers and sellers ready to trade at various prices.

The Bottom Line

Volume is a handy tool to study trends, and as you can see, there are many ways to use it. Basic guidelines can be used to assess market strength or weakness, as well as to check if volume is confirming a price move or signaling that a reversal might be at hand. Indicators based on volume are sometimes used to help in the decision process. In short, while volume is not a precise tool, entry and exit signals can sometimes be identified by looking at price action, volume, and a volume indicator.

 

VOLUME MOVING AVERAGE

This is essentially as it suggests - a moving average that runs through the volume - this is a great for confirming volume breakouts alongside support/resistances or trendline breakouts.


STRATEGIES


1ST IN SEQUENCE VOLUME SPIKE 

These are signified by either the highlighted volume bars as volume breakouts although you will only be alerted by the first change in trend in volume breakout on each cycle, these have proven to be more consistently reliable although all volume breakouts can offer a great entry point for strong trend continuation. Utilise these in conjunction with breakouts through the Volume Moving Average or self drawn Trend Lines on the Volume (Slightly more advanced but extremely basic and easy to learn - it is advised to do wider reading into the Volume)





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