Significance of using Volume in Stock Market Analysis

Posted on Posted in Stock Market

Stock volume is the number of stocks traded during a given time period. The bulk represents the interest level in a stock. Volume is simply the number of stocks that trade from sellers to buyers as a measure of activity. Let us understand with the help of this small example. That is a buyer of stock purchases 100 stocks from a seller. Then the volume for that period increases by 100 stocks based on that transaction. It is a very powerful tool, but it is often ignored because it is a simple indicator.

Significance of using Volume in Stock Market Analysis

Many traders know how to use bulk in order to increase their profits and minimize risk. Volume is the total number of shares traded within a specified timeframe. The higher the bulk, the greater the liquidity. Generally, the higher the liquidity the lower the volatility, with volatility being the size of price moves. Volume slowly increases in the direction of a trend. A volume point can indicate the end of a trend. There are three primary bulk indicators:

(1)On Balance bulk,

(2)Accumulation/Distribution Line and

(3)Ease of Movement.

The function of on balance bulk is to measure positive and negative bulk. Displaying it in graph form so that the trader can determine. If money is flowing into or out of a stock.

Accumulation line/distribution line is to measure money flow into and out of stocks. The difference between On Balance bulk and Accumulation/Distribution line is, it takes the opening and closing prices into the calculation. This figure is then plotted in line graph form, similar to the On Balance Volume indicator.

Ease of Movement indicator reflects the number of volumes that are needed to maneuver value. It had been developed to point out the connection between bulk and value amendment and it’s premeditated on a graph with a point of zero. When the price is moving up in light bulk, this indicator shows high values above zero. When the price is moving, the downward low volume is shown. If it takes lots of volumes to move price, the indicator stays near zero.

This technical analysis helps in upholding accurate tips. Advisory firms widely practice this technical analysis. Money Classic Research hires experts and generates accurate tips in the stock market.

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