The Different High Volume Trading Strategies

Volume is used as a measure of how much a given stock has been traded in a specified period of time. Even though this tool is very powerful for making investment decisions, a large number of traders overlook it because of its simplicity. It is possible to uncover information about volume of a stock in particular from just anywhere, but not a lot of investors and traders are aware of how to use it for controlling their risk and doubling their returns. For every buyer, there has to be someone selling the stock they buy just like every seller has to have a buyer for getting rid of their shares. 

Movement is created by this battle between buyers and sellers for getting the best price in varying timeframes while the long term fundamental and technical factors play out. Profits can be bolstered and risks can be reduced when traders analyze stock via volume. 

Basic Guidelines For Trading Volume 

There are guidelines and strategies that can be used for volume trading for determining the weakness and strength of a move. Traders wish to make only strong moves and go in the opposite direction of weak one. While these strategies may not work in all situations, they are generally good for making trading decisions. 

· Volume and Market Interest 

High volume trades are common in a rising market. In order to ensure prices remain high, buyers need increasing enthusiasm and increasing numbers. Lack of interest is shown through decreasing volume and increasing prices, which warns of potential reversal in trend. In simple terms, a rise or drop in price in cases of low volume is not a good signal whereas a movement in price on large volume is a strong one. 

· Volume and Exhaustion Moves 

Exhaustion moves are common in a falling or rising market. These are usually indicators of a potential end of a trend and are marked by sharp increase in volume and sharp movements in price. The number of buyers is exhausted by participants who were waiting or are afraid of missing more in a top market. When the market hits rock bottom, a huge number of traders are forced out because of falling prices and this volatility increases volume. 

· Bullish Signs 

Bullish signs can be identified in the market with volume. For instance, volume may increase with a decline in price, but then the price rises and then falls again. If this reduction in price is still higher than the previous low and the second decline causes the volume to diminish; it is defined as a bullish sign.

· Volume and Price Reversals 

After a long price movement, whether lower or higher, if there is little movement and high volume, it can be an indication of a reversal. 

· Volume and Breakouts 

When there is a breakout from a range or any other chart pattern, an increase in volume is an indicator of the move’s strength. Reducing volume or little change in it signals chances of a false breakout and lack of interest.

As long as the latest data is studied, any of these high volume trading strategies can be used for successful stock trading.