Ultimately, the movement of a stock 's price is the most important factor. This is what makes money if the movement is in our favor. The volume is the best indicator of supply and demand. A correct interpretation allows to know the number of large institutions such as mutual funds, pension funds and hedge funds are supporting their actions. Since approximately 75% of all stock market activity is coming from these large entities is a crucial factor that determines the movement of stock price.
Strong action is not only about big profits that lead to new highs, but there is a tendency to make upward price movements in large volume. When the action is corrected, usually in the amount of light. This type of price and volume action tells you that a file is technically healthy. It's a great advantage, once dominate in technical analysis.
On the other hand, could have serious problems later if the price of a stock 's going down hard on big volume. Another sign of danger would be if the stock rebounds in smaller steps on weak or below average volume. When you see this kind of price and volume action is a strong indication of selling the shares. You always want to be as objective trade decisions.
A good sign if his actions would quickly recover from a sell-off in the coming days or less and recover most or all of the loss. If the recovery in prices is in large volume, the chances of a strong back is very good. By contrast, if the stock recovers only a small amount the next day, and the volume is low, I would suggest selling the shares.
Correct interpretation of price and volume can give you a huge advantage when trading the stock market or other trading venue. Most of the merchants of the best world 's past and present, made or currently make their business decisions based largely on technical analysis, or in other words, reading the chart. Looking historically proven, price patterns are repeated with the volume of work in your favor.
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