Volume for future and options: How many contracs have changed hands
* It is Not reliable 80%
* Most of the time Volume increases due to sentiment.
Eg. rural based stocks
* Some times during exiting of big player volume is increased so that you can buy stocks.
* Volumes tells sentiment of traders (it can be honest or fake?)
* Volumes tells momentum but it should be sustainable (it can be honest or fake?)
Using this volume graph with some other graph can be helpful.
Using Volumes
1. Trend Confirmation
2. Exhaustion Moves and Volume
Sharp moves in price combined with a sharp increase in volume called - Exhaustion moves. it signals it of trend
3. Bullish Signs
Volume can be useful in identifying bullish signs. For example, imagine volume increases on a price decline and then the price moves higher, followed by a move back lower. If the price on the move back lower doesn't fall below the previous low, and volume is diminished on the second decline, then this is usually interpreted as a bullish sign.
4. Volume and Price Reversals
with little price movement and heavy volume, this might indicate that a reversal is underway, and prices will change direction.
5. Volume and Breakouts vs. False Breakouts
On the initial breakout from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in volume or declining volume on a breakout indicates a lack of interest and a higher probability for a false breakout.
6. Volume History
Volume should be looked at relative to recent history. Comparing today to volume 50 years ago might provide irrelevant data. The more recent the data sets, the more relevant they are likely to be.
Three important volume indicators
1. On Balance Volume (OBV) use with other indicator (Moving Average)
2. Chaikin Money Flow
Use it with some momentum indicator
Gives result for selling and buying decisions. works for cash and future.
Famous for intraday.
Not related to price action
3. Klinger Oscillator