StockFetcher Forums · General Discussion · Volume as a leading indicator- PLEASE CONTRIBUTE<< >>Post Follow-up
135 posts
msg #87897
Ignore calhawk01
2/6/2010 12:34:16 PM

Most of us have added volume on our trading software as a indicator. Most of us monitor the volume and compare it to the price movement. We have all noticed situations that occur again and again prior to the stock reversing. Can we start a discussion of how we can use Volume as a indicator prior to the stock going up or down. I have read many T/A books and done many searches on Google, but you always end up getting the generalized definition of Volume. What i want to do is for us to discuss some situations where we could use volume as a leading indicator for price movement.

Situation 1
I have noticed that prior to a reversal the stock appears to be touching the lower bollinger and continues to do so for more than two day the volume starts to increase. On our charting software we see larger and larger RED bars while the price is going on. Two things are occuring in this situation.
1) Price is going down
2) Sellers are anxious to get out
3) For every seller there is a buyer -- so the stock is getting newer investors/traders
During this scenario one would think the larger the red bar the worst the people's sentiment -- but remember that for every seller there is a buyer.
In a situation as such i use volume as a leading indicator because even though the price is going down - the shares seem to be extremely oversold and they have changed hands into fresher and stronger hands

Situation 2
After the stock appears to have been going down for several days and we watch the volume bars increase - next thing we might notice is that the volume starts to decrease without a movement in price. I have noticed that volume seem to be very small prior to a big move up.

Please discuss and give example

4,577 posts
msg #87905
Ignore Eman93
2/6/2010 4:41:02 PM

I think there are a few difftent types of volume bottoms.... one is the capitulation bottom which helps signal a market structure low....volume is increasing each day until the bottom and decreses into the rally...
the volume will then decrease as the price starts to move up...

See this post it is very informative....

StockFetcher Forums · General Discussion · Volume as a leading indicator- PLEASE CONTRIBUTE<< >>Post Follow-up

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