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LEARNING RESOURCES

I. Define Volume Analysis and Application

Volume is an expression of supply and demand. When the supply cannot keep up with demands, people rushed in to buy in. And Volume is naturally enlarged; likewise, if the needs cannot keep out with demand, there are little people on the market place in which few people buy in, and Volume would definitely shrink. However, Volume can be calculated by digitizing the crowds. In an abroad sense, Volume includes Turnover Volume, Total Turnover in Value, Turnover Rate. Yet, Volume in a narrow sense means Turnover Volume.

Generally speaking, breaking up the neckline bytes, strong pressure bytes all requires Heavy Volume Attack; that is, there must be Rise and Volume to work in coordination. Yet, breaking downward bytes or downside did not require Volume for coordination. Tremendous downfall created a successive daily downfall until there was a second heavy volume, showing that there was a new capital entering the market, to grab rebound or bargain hunting. The price went up and the volume increased. Price drop is abbreviated as volume and price coordination or volume and price mismatch.

Although volume exceeds price, it does not necessarily mean Volume determine everything. In four major elements of price, volume, time, and space, price is the most basic starting point. If price did without other factors, it would become passive water, and rootless trees. Volume could work in coordination with price to carry out anaylsis. However, volume would not determine the change of price. Customers shall have a clear understanding on this matter.

II. Five Common Types of Volume

As a result, market is the result of interaction among powers from all parties. Even though Volume may be easier to fraud, the main force of control disk usually takes advantage of the vast retail investors who only see the Technical Analysis as a tip of the iceberg, and soon make a fuss on each indicator; however, Volume still appears to be one of the most objective elements.

1. Marketing divergence activates turnover. The so-called turnover certainly means there is a deal, and there is a will. One-sided purchase or one-sided sale can never make a deal. Turnover is bound to be a part of people acting in short position of after market whereas the other part of people acting in long position of the market. As a result, there is a gigantic divergence in which people take what they need to reach an agreement of turnover.

2. Shrinkage. Shrinkage means that market turnover is extremely light. Most people are pretty sure about last stage of the market trend and have come to an agreement. There are two types of situations: First, market participants all look down at after market resulting in a few people purchasing and no one to buy in; thus, it shrinks drastically. Secondly, market participants all look up on after market in which people only buy in and no one sell out; thus it shrinks drastically. Shrinkage generally happens during the middle stage on which people are quite sure about the trend of after market. Shrinkage dropped thereafter. When facing this kind of situation, one shall insist of outgoing. When the same amount shrank to a certain level, it’s time to release heavy volume at the time of rally to buy in again. Meanwhile, it shrinks when it rises. When you face this kind of situation, you should definitely buy in, and sit and wait for Pickup. Wait until there is a huge power released, and then sell out since the equivalent upper rush is in fatigue.

3. Heavy Volume. Heavy Volume usually happens at the turning point of juncture occurred in a market trend. All powers from various parties on market place came up with a divergence against after market little by little. A part of people insisted on acting in short position of after market whereas the other part of people insisted on acting in long position. Some people gave away their family properties whereas the other part of people gave a generous amount to absorb shares. For Heavy Volume Compared to Shrinkage, there is a huge false component. The main power of control disk took advantage of the bargaining chip with a generous amount to knock on each other for releasing the amount of day. It is as easy as pie. If you can simply peer through the intent of main power, you can beat them at their own game.

4. Stacking Up. When the main power intents to move up, it would usually create a remarkable Volume. In a few days or few weeks, Volume increased little by little, and the price was gradually lifted. Volume on recent K line chart formed a shape of mounds. The prettier the mound, the bigger change to product a big Picture Quote. Likewise, the highest mound demonstrates that the main power did not feel like playing anymore, and was releasing massive shipments.

5. Irregularity of the amount Zoom in & Zoom out. Under such situation, there is no sudden favorable or under the basic stable premises of overall situation. It must be the evil bookmakers who suddenly released a historical massive amount in a calm sea, and soon faded away. It is the disqualified bookmakers who intents to attract the attention of market space so as to shipping.

III. The Relationship between Market Volume and Pricing

1. Confirm the current trend in process of pricing: To go upstream or drop down, its trend can be applied to bigger Volume or the increasing Volume day by day to confirm. Reversely, follow the trend. You may use Volume to double check by using the increasingly subtracted light Volume.

2. Trend reveals a warning of weakness: If the market Volume keeps shrinking, it warns you that the current trend is becoming weaker. Especially, under the situation of light Volume in market, it reveals a new high or new low record that should be worth-hesitating.

3. Confirmation method for interval breakthrough: When the market loses its operating trend, it is in the middle of interval fluctuations, to create new high or new low; that is, to realize a breakthrough for the intervals to dramatically increase its assorted Volume. Pricing regain its breakthrough; yet, it lacks of cooperation with Volume, which foretells that the market hasn’t really changed the current operating intervals. And you should be more careful on such matter.

4. Opinion on the following stock Volume

  • a. Volume would fasten the size of a stock Volume of Quote Change, which reflects the degree of how the stock attracts the market. When more people or more capital had a bright future on stocks, they would invest more capitals. While more people did not look up upon the future of stocks, they would sell out; therefore, it would result in a downfall of pricing. However, no matter how it would be, this would be a relative process; that is, not all people have a “consistent” idea on better or worse. This is a much simpler perspective. A deeper significance lies in where the stocks were in different pricing of areas. The number of people who looked up and people who looked down would start to change. For example, there were a hundred people engaging in trading, there might be 80 people who looked up on a particular stock that costs 10 RMB and think it would have a better price. After these 80 people bought in, the pricing went up indeed. When stock pricing reached 30 RMB, there would be 30 people from the people who first bought in think that the pricing would not go up anymore, and thus they sold out. The 20 people who first looked down on the pricing would think the pricing might go up. An instant imbalance developed thereafter. There were only 30 people sold out and 20 people bought in, which creates a pricing downfall. The number of people who look down and look up would reintegrate and decide what the next trend was.
  • b. Most people share a false belief: The more the Volume, the higher the pricing. It should be noted that there must be a corresponding sellers to any buyer no matter at which pricing. It is all the same. In a pricing area, if Volume were surprisingly enlarged, it could be examined that people in this area share a very huge divergence. For example, 50 people looked up whereas 50 people looked down. If Volume were relatively light, it tells that people who share divergence were few or unlikely to pay attention to such stock. For example, 5 people who looked up and 5 others who looked down whereas 90 people who didn’t do anything at all or were watching.
  • c. From the variance of Volume, we can analyze on the degree of how a particular stock can attract the market. The bigger the Volume, the more attractive the pricing would be. And the later fluctuation of pricing may have a possibility to grow bigger.
  • d. You may analyze the variance of Volume of the pricing pressure and support area of a particular stock. In a pricing area, if Volume is huge, it tells that this area has a very big pressure or support, and the trend will stop or start to reverse.
  • e. You may observe the pricing to walk towards the direction in Volume intensive area. When the pricing goes out of Volume intensive area, it tells the divergence of Bull and Bear temporality come to a unified agreement. If it goes upstream, the pricing will tend to go upward; however, if it goes downside, the pricing will tend to fall down.
  • f. You may observe Volume in different pricing areas to judge the well-being or continuity of trend by using the size of relative values. With the upheaval of a particular pricing, Volume shall present a ladder weakening. Generally speaking, the higher the pricing in correspondent to stocks, the fewer the people who are interested in this stock or dare to drop in. Yet, on this point, if we look upon from Volume perspective, it would be simpler and easier to understand.
  • g. Merely based on Volume, it cannot help us to judge the variance in the pricing trend. At least, we need to have the pricing to make sure. Volume is not only one of the key factors of variance of pricing, but also a possible triggered factor that may cause the essence to change. But most of the time, we only talk about the function of the stimuli.
  • h. There is a kind of acknowledgement on the market which thinks the rise of an individual stock or stock index must be in cooperation with the amount of energy. If the market pricing goes up, it means there is sufficient kinetic energy for a rise, which foretells that the individual stock or stock index will continue to rise. Likewise, if the shrinkage rises, it will be considered an immeasurable empty space for the rise, and the amount of pricing does not work well, which foretells that there is little uprising space for individual stock or stock index, or it is hardly to continue to rise.

Notice

  • There are more people buy in than buy out on the stock market. A bullish Stock Quote is called Bull Market.
  • Contrary to Bull Market, Bear Market indicates a bearish Stock Quote in which more people to buy out than buy in. What causes a Bear Market is similar to those that form a Bull Market. There is only a matter of changes in the reverse direction.
  • Bullish Market refers to the investors who are optimistic about the stock market. The investors predicted the stock price will go up; thus, they bought the stocks, and waited for the stock to go up to a particular price to sell out for obtaining credit balances.
  • Short investors and stock trader that although the current share price is higher, but the prospects look bad on the stock market, the expected stock price will fall, so the borrowed stock to sell in a timely manner, subject to price and buy when the price dropped to a certain order Get the difference between revenue.

NSE CME Group EX NYSE Euronext
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