Volume Analysis-a new approach!!!:mrtq13

There is a book on volume and price analysis named "Master the markets by Tom William". I read it year ago. I had hard time understanding it then, though it helped me then in several ways. Now I think that volume analysis needs not to be that complex. For example,we don’t need to understand “test of volume”. It is however a good book-worth reading and collecting……………….

I like to think averaging…………..I found that averaging candles boosted my trading!

How about averaging volume? This is an interesting idea. In fact,this is an important idea. We need to see volume or accumulation by averaging!!! Why? There are several reasons. But I want to keep this tutorial simple and small(I don’t have time)…………So…………….

I have seen we count the volume like this : If today’s volume goes above last 15 days average volume,then we take it as bullish volume………..This is ok. But this doesn’t tell me many important things………..For example,this doesn’t actually give me buy signal,or accumulation zone,or euphoric zone,or consolidation zone…………….

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The techniques/Four techniques :

There are some techniques of volume reading you need to know. It may make your volume analysis simple, but better………………

First technique is : we need to see accumulation of volume before we buy a stock. This accumulation could be by institution or retail traders. We don’t care. All we care is there is accumulation at our buy zone or signals………..We need volume traded enough before we buy something. Because that accumulation of volume says,the stock is of interest of many………….We need to buy something that the market likes………..And accumulation will tell us about that………..

Accumulation,after a stock has retraced enough or consolidating after retracement,can signal upcoming uptrend of a stock. Let’s give it a name,AV or accumulation volume…………….

Second technique is : after the stock has gone high enough,there will always be profit taking situation. There will be good volume traded,and then the stock goes into consolidation with grey or bearish volume zone……….

But interestingly the stock may start to generate new buy volume at this high level of price. And this new volume generation or accumulation could start a new trend upwards by the stock. TAs have given this type of scenario the name – VT or volume trend. Such volume generations push the stock higher or refuel the trend………..

Third technique is : all stocks must stop their uptrend at a climax situation or euphoric zone. What happens is that a huge volume is traded at the very high level of price. This shouldn’t have happened. This is euphoric zone,because small traders mostly enter at this zone with huge enthusiasm,and big traders sell to them here……….

You will see this situation again and again in almost all stocks. TAs call this zone,VC or climax volume……………

Fourth technique is : we need to ignore falling volume. There are some zones where volume means nothing,and so is the price trend or movement. We need to completely ignore them. This is known as null volume or VN…………….

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The indicator/V-spike :

Fine………..!!! But how do we find out all these? Any indicator?? There is one interesting indicator with the Bull and Bear Volume indicator(a nice one) of amibroker. I have separated and somewhat modified it to suit our need. I will attach it at the end of this post,so all can use it and try it…………..By the way,I have given this indicator the name,V-spike,it shows volume spikes at different level of price……………

See the V-spike indicator in the chart below……….The green is accumulation(depending on where the stock is),the grey is distribution zone……………….




Accumulation Volume/AV :

Now let’s see some example…………First,we need to see accumulation before we buy or when we get a buy signal…………See the chart of Batashoe below. We got a buy signal at the last bar. But interestingly,before that our V-Spike Indicator told there were buy volume. Price has retraced enough. We got a buy signal. Volume is in accumulation zone. This is a good place to buy…………Right…………….

This is known as AV or accumulation volume………..We need to see average accumulation,because that tells us that the stock is strong enough to enter…….





See another type of accumulation. We know that consolidation is a good place to enter a stock. But wouldn’t it be great that we could see that accumulation is going on in the consolidation area……………?? Yeah,it would be great……….Our V-spike indicator will tell us that accumulation is going on at the consolidation zone.………..

See the chart of Agni below. Such a nice accumulation at the consolidation zone will surely tell us that this stock is a nice one to get in………………



Volume Trend/VT :

After the stock goes high,there will be some kind of profit taking. If you have good trading system,your trading system will show you that profit taking zone. Interestingly,after the profit taking is over, the stock goes into some kind of rest. Then,again,we start to see accumulation of volume. Why………..??

Because the volume is actually trying to start a new trend or wave or leg(upward).

Now when we start to see spike by our V-spike indicator at or after the stocks’ consolidation or resting period,we should treat it as the accumulation for the start of a new trend…………This is known as Volume trend or VT. New buyers are entering at this zone,pushing the previous trend of the stock upward again……………This is easy to detect. Usually,breakouts are such trend makers……………….This is the second entry zone into a stock!! See the chart below to understand VT.

Volume climax/VC :

This is a very important concept to understand. A very important one. After a stock has gone higher,the volume suddenly rises unusually. Our V-spike starts to give green volume signals. But that is unusual. Because at a high price,why should the stock generate huge volume………?? Something is wrong here. Yeah,there is…………..

What happens is called euphoria. A lot of small traders for an unknown reason or impulsive attitude feel that the stock is just gonna move higher,and so they should enter at that level…………They can’t understand that it is the top position of the stock. Here the smart traders start to sell,and even manipulate the price to rise higher; and then start to sell. That is why,you will see bullish candle with very high volume at the top of price. But you will see that later,the stock seems to have lost strength and falling and falling…………..

Now if our V-spike gives green signals at the high of price,it tells us that we may see VC or climax situation. After the green signals,the indicator also will turn grey,which indicates more bearish scenario………….

Below is an example of VC in Aramit. See where that climax has happened-just at the resistance level with unusual volume. After that all indicators turned red or bearish………………

Remember the 500 crore day in DSE??? That was also VC day………..!!!!!

Volume Null/VN :

Now the indicator will tell us about another type of scenario where no significant volume is traded……….We sholudn’t bother about volume that is of little or no interest to us. For example,when the stock is falling,the volume of that fall doesn’t mean anything to us………..Our V-spike shows us that zone of null volume and thus shows us the way of better analysis……………..See the Null volume on the chart below………

Summary :

Well,this is all there is……………I hope this article will be helpful to ur analysis. Also,the indicator would help you,I hope…….Note that the indicator(V-spike) is no magic. It just hints us some directions,sometimes it can be wrong. But the good thing is that many times the indicator works nicely……………Whenever we see a spike,we need to try to understand what is going on behind that spike(Green or Grey) of our V-spike indicator..........I have attached the indicator below.Pls,download it,and load it in Amibroker.See if you find it useful.................!!!




THX!!!!