This “Guru” Will Always Tell You If Your Trade Could Be A Moneymakerby TOM GENTILE
Here are four reasons why volume is absolutely crucial to your trading career:
1. Volume can confirm the trend. A strong upward or downward move that’s accompanied by a high volume is identified as a trend that is intact. A lower volume indicates that the trend could break.
2. Volume can indicate a potential reversal in a stock. If a stock is consistently trading below its average daily volume but suddenly shows a spike in volume, then there’s a strong possibility that of the trend reversing for that stock.
3. Volume can indicate the end of a trend. Think of this in terms of divergence, which we talked about at the end of last year. If a stock price is increasing, but the volume is decreasing, then chances are, trend is running out of steam. This is because less investors and traders are buying the stock, even though the prices are getting higher. And as the volume declines, so does the potential for the stock to move higher… making a downward reversal a great possibility.
4. Volume can affect a stock’s market price. Remember, volume is the number of shares or contracts that are traded during a specific period of time. Therefore, a high volume means there’s a lot of interest in a stock, so more traders and investors are buying it. A low volume means just the opposite – there’s not a lot of interest in the stock, so fewer traders and investors are buying it. Less demand can lead to decrease in price while more demand can lead to an increase in price.
Source: Power Profit Trades
http://powerprofittrades.com/2016/02/th ... moneymaker
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