How to Use Volume for Trend Strength Confirmation?

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Sarah · Accepted Answer

Volume measures the number of shares traded in a stock or contracts traded in futures or options. Volume can indicate market strength because rising markets on increasing volume are typically viewed as strong and healthy. The trend is gathering strength to the downside when prices fall on increasing volume. A reversal might be taking shape when prices reach new highs or no lows on decreasing volume. On-balance volume (OBV) and the Klinger oscillator are charting tools that are based on volume.A rising market should see rising volume. Buyers require increasing numbers and increasing enthusiasm to keep pushing prices higher. Increasing price and decreasing volume might suggest a lack of interest and this is a warning of a potential reversal. This can be hard to wrap your mind around but the simple fact is that a price drop or rise on little volume isn't a strong signal. A price drop or rise on large volume is a stronger signal that something in the stock has fundamentally changed.

How to Use Volume for Trend Strength Confirmation?

1 Answer

1 Answer

How to Use Volume for Trend Strength Confirmation?

1 Answer

1 Answer

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