jayjay121 said:
hi could some tell me how volume can influence my trades and what software or web site provides detailed charts on volume. I understand what volume is but the thing i dont get about it is that the volume always gets larger thoughout the day, is this because it is calculating the volume of trades so far or only at the given time? I understand that if there is good volume behind moves than there is a good trading opputunity but how are we supposed to spot this volume breakout before it happens, surely once it has happened its all too late, what do you think?
your thoughts are appreciated and by the way all your comments are what i read everyday and have learnt so much, many thanks
Volume in and of itself is reflective only of trading activity, such as the number of shares traded. In order to know whether it is indicative of buying interest or selling interest, you have to look at the results of all this activity, i.e., the effect on price. In other words, there is no such thing as "buy" volume or "sell" volume; there is only volume, since a buy cannot take place without a sell (or vice-versa). What makes price move up is not the buys in and of themselves, but the demand.
As to high volume at the bottom of a dip or W or rounded bottom or whatever, again, it depends on the effect on price. If there's a lot of volume and price doesn't fall, then you can assume that the selling is exhausted and that aggressive buyers can buy the bounce, or that more conservative buyers can begin the accumulation process, depending on the context. If volume is high and price continues to fall, then selling is not yet done and buyers are not willing to do more than take shares off the hands of panicky sellers; they are not, in other words, anywhere near ready to pay a premium to stop the decline. The fact that the volume is high, however, suggests that selling is near an end.
Of course, "high" is relative and has little meaning unless it is placed within the context of a chart. One man's selling climax is another man's continuation unless one looks at the forest. You should understand, though, that "high" volume or "high" trading activity is indicative of professional money and may be more meaningful to you than "quiet" volume, thus warranting more of your attention (which is why many retail traders limit their activities to the morning or afternoon).
Db
Afterthought: If you're interested in how the volume throughout the day is accumulated to provide the EOD (end-of-day) volume, play with
bigcharts.com. It's free and provides both intraday and interday charts going back decades (not just two or three years).
