Volume Trading

Price action and volume are fundamental market data. Scrutinizing volume and analysis its patterns and trends can reveal powerful insights for traders.

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In the technical analysis of financial markets, there are three essential dimensions: price, volume, and time.

Time-based price charts, like the 5-minute bar chart, are standard. As a result, most analyses consider price and time, but volume is left out. Moreover, for the uninitiated, volume signals add complication without value.

For these reasons, volume is often neglected, despite its potential value to price analysis.

This guide presents volume trading in an accessible manner. I’ve included basic concepts from Volume Spread Analysis (VSA) and volume indicators that are more intuitive.

Most of the volume trading methods revolve around extremes. Looking at volume can be challenging and not always beneficial. However, it usually pays to look closer when the volume is exceptionally low or high. Hence, we have a section devoted to studying volume extremes.

A final note of caution. As volume analysis seems elusive, it offers an opportunity for some vendors to claim that it is the Holy Grail. As a result, volume-based trading systems and indicators are often sold as black boxes.

Beware! Volume is nothing more than just another trading tool.