Article How to Read the Psychological State of the Market

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When volume is high, those traders unlucky enough to be losing money in their positions feel the sharp sting of their losses. In order to alleviate the pain, these traders quickly close their positions (at a loss). As losers exit the market, a trend based on high volume is likely to be short lived. But a trend based on moderate volume can last an extremely long time since small losses can accumulate over time into what may become very large losses. The longest trends are probably driven by markets either going nowhere, changing moderately or even moving both up and down day after day, forming only a gradual trend, which is apparent when viewed in retrospect.
But there’s still more to the volume story that pertains to market psychology. It would take many articles to cover the theme of market psychology in its entirety – there are many more trading indicators that gauge the market’s psychological state. This article owes thanks to Dr. Alexander Elder for his work, which renders many...

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