Chapter 9 – Chart Indicators – Volume

This is an excerpt from the Liberated Stock Trader Academy Book and Training Course.  Chapter 9, Section 2.  This section covers everything you need to know about how to interpret Volume and Price Volume Indicators, such as Money Flow, On Balance Volume, Time Segmented Volume & Cumulative Moneystream.

The Price Volume Relationship

There are some important characteristics of volume and price in the market place.

Price Up–Volume Up (PUVU) Price moving up on increased volume. This is bullish as it shows us that more participants are interested in selling the stock at higher prices and that most importantly more people are interested in buying the stock at those higher prices.  In an uptrend this signals the trend will continue, in a down trend this signals a possible correction or change in the trend’s short term direction to upwards.

Price Up-Volume Down (PUVD) in an uptrend this is very bearish as it suggests that although prices are rising there are fewer participants suggesting people are backing away from the higher prices.  This also infers that the trend is weakening.  In a down trend it suggests a continuance of the down trend.

Price Down–Volume Up (PDVU) in a down trend this may signal that a change in trend is likely, as we saw with the “Blow off bottom” there might be a huge selling climax, then the trend adjusts from down to sideways or down to up.  In an uptrend this may indicate a crisis, panic selling or simply when a stock is going out of favor.  The pressure is on the sell side and to sell they have to accept lower prices. A strong negative signal!

Price Down–Volume Down (PDVD) in a downtrend this can suggest that the retreat is slowing or beginning to end as there are fewer people interested in buying or selling the stock at these prices.  In an uptrend this may indicate the stock is stopping for breath or due a pull back before continuing on its upward trajectory.   Volume tends to trend in the same direction as the price trend, so PDVD also suggests a continuation of the main down trend, or a pull back and possible continuation of an uptrend.

So you see not only the price but the direction of both price and volume is important.  This is where the Price Volume Indicators play an important role.

Other Chapters of the book are here

Chapter 1 – Essential Stock Market Knowledge – Fundamentals

Chapter 2 – Why do Booms and Busts Occur?

Chapter 3 – Stock Market Cycles – Business & Economic Cycles – Kondratieff to Kuznets

Chapter 4 – Is the Company in great shape – P/E Ratio

Chapter 5 – How to find the best stocks

Chapter 6 – Japanese Candlesticks – Bullish Reversal Patterns

Chapter 7 – How to draw trend lines

Chapter 8 – ROC Rate of Change Indicator