In Day, trading volumes have equal importance along with price to confirm the formation of a trend or a technical pattern. With the help of volumes, we can easily understand the imbalance in the demand and supply forces of a stock.

VOLUME TOPPERS: Generally, the first hour high volume stocks will move in the same direction, higher or lower for remaining part of the day. In such stocks, it is profitable to enter into trades if the stock is moving in the direction of the market. In other words if the market is strongly moving in upward direction, it is profitable to take long position in high volume stocks which are also moving in upward direction and if the market is weak and moving in downward direction, it is profitable to take short position in high volume stocks which are also moving in downward direction. To use this technique, you should find out the first hour volume toppers and enter into trades after 10.55 a.m., Details regarding top volume stocks can be seen on both BSE and NSE Terminals. This information is also available in many web sites like money control, yahoo finance etc.

In General, heavy volumes should support rising prices. Heavy volumes confirm the up move and indicate uptrend.

In this chapter, we will discuss about how volume figures help us to take trading decisions. Price and volumes have certain characteristics, which are very general in nature. Since we know that the fluctuation in the prices of stocks are due to difference in demand and supply forces of stocks, volume figures helps us to determine whether the demand side is greater or supply side is greater for stocks at any given point of time.

If you open an online Trading Account for day trading in Geojit, Kotak Securities, India Infoline, or some other Stock Broking Company, which gives you real-time terminal facility, and subscribe to their Online Real-time Trader Terminal Facility, you can watch real time volumes in both figures and charts. With the help of this volume information, you can take profitable trading decisions in real time by clearly understanding the demand and supply forces of stocks that you are watching.

The general characteristics of price and volumes are as follows: When the price is in Uptrend, the volume of trading usually increases, when the price breakout to the upside of a formation or pattern, the volume of trading usually increases, when the price is in downtrend, the volume of trading will be usually low, when the price breakout to the downside of a formation, the volume of trading will be usually low.

PRICE AND VOLUME COMPARISON IN UPTRENDS:When the price of a stock is in uptrend, generally the volume rises, since rising price attracts more and more traders who want to get into a profitable situation.If you observe an uptrend in the price of a stock, you should not buy that stock until the uptrend is confirmed by increase of volume. If the volume increases and remains higher than average volume, you can consider that the uptrend is confirmed. On the other hand, if the start of the uptrend is not accompanied by increased volume, the uptrend may not be strong and the uptrend may not continue.
PRICE AND VOLUME COMPARISON IN UPSIDE BREAKOUTS
If a price breakout took place on upside in a price pattern or formation, an increase in trading volume actually confirms that upside breakout and further price rise. The larger the increase in volume, the greater is the price rise potential signified by the breakout.

The combination of an upside price breakout and a large increase in volume represents a strong buy signal. This type of signal presents the opportunity to buy at a lower price than waiting for an uptrend to become established. The best time to buy a stock is just after it has made a high volume breakout to the upside of a bottom formation above a boundary line, trend line or a neckline.
PRICE AND VOLUME COMPARISON IN DOWN TRENDS
When the price of a stock goes into a downtrend, the daily trading volume usually decreases. This happens because the potential buyers lose interest in a stock when they see that its price is declining. The price of a stock can fall without a rise in volume if potential buyers loose interest. (But a rise in price is usually accompanied by higher volumes). However, higher volume can also accompany a falling stock price, this happens when all of a sudden on some rumors or some negative information when many of the stockholders decide to sell the stock.

Therefore, when a stock price goes into down trend, the volume may decrease, increase or remain the same. It is always better to sell away the stock when you see a downtrend in its price.

TIMING ANALYSIS IN DAY TRADING

In Day trading generally stock prices registers either its intra day high price or intra day low price before 11.00 a.m. In the same way generally in most cases, price breakout or price breakdown will took place after 2.00 p.m. The market will become slow in between 11.00 a.m., and 2.00 p.m., this timing analysis will not apply in certain extremely bull phase or bear phase of the markets. In the same way it will not apply to certain actively traded stocks due to favorable or unfavorable news announcements etc., In General FIRST hour and LAST hour trading is most important.

Source: Srinu

 

 

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