I have many trading rules, one of it is the volume rule. This rule is based on what I read and what I have observed.
Increasing volume with price increase is a good thing. This means more people are buying.
After a stock has increased substantially, it is time for it to take a rest. Why? Because some people may want to lock in profit to pay bills, have a nice dinner or whatever. Observe the reaction. If the correction occur with decreasing volume, it indicates that less and less sellers are willing to let go and may be waiting for bigger profits.
After the selling has dried up, the buyers may start to push it up again. If this push comes with increasing volume, then good probability for the continuation of the uptrend.
Beware of extremely high volume. This may indicates the climax of the uptrend. This rule may be ignored if this happens when the price breaks new high. Just maybe.
Any up move with low volume should be treated with caution.
But all these rules can be manipulated by the syndicate. It is easy to buy and sell between different accounts. This will need years of experience to differentiate manipulations and to be able to get a slice of the cake before everything is lost.
2 comments:
How do you interpret extremely thin or no volume counter?
I will avoid extremely thin or no volume counter. The thinner they are, the easier they can be manipulated.
You know lah...1 lot here, price jumps up 10 places, another lot there, price jumps down 10 places.
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