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Trade Volume

Trade Volume

Estimated reading time: 3 minutes

Trade Volume refers to the total number of shares of equities or other assets that have been traded during a specific time frame, providing investors with information regarding the liquidity and movement of a particular stock or asset. In conjunction with price, volume is frequently used to present a more comprehensive market analysis. The following are regular usage scenarios:

1. Confirming Trend:

When the price rises and trading volume increases, it indicates that the bulls are strengthening and there is sufficient market momentum. On the contrary, if the price falls and trading volume increases, there is heavy bearish pressure, and there is a greater possibility of the market developing a downward trend.

2. Confirming Reversal:

When there is a clear reversal signal in price accompanied by a sharp increase in trading volume, it may indicate a change in market sentiment and an increased possibility of a trend reversal.

3. Confirmation of breakouts:

In the event that a price surpasses a significant pricing level associated with a significant trade volume, this possibly signals a major growth in the strength and dependability of the breakout.

4. Confirmation of price tops or bottoms:

When the price continues to rise or fall, if there is a significant decrease in trading volume, it indicates that market momentum is starting to weaken, and a top or bottom may be forming. Observing the relationship between trading volume and price can provide opportunities for buying or selling. For example, when approaching a support level, if the price reaches a new low while the trading volume shows a declining trend, it may indicate a weakening of selling pressure and suggest the possibility of a rebound opportunity.

Please note that combining the interpretation of trading volume with other technical indicators generally yields more accurate results. However, it is important to recognize that the interpretation of trading volume is not always definitive, for example a temporary volume decrease could occur before a true breakout.  For optimized judgment, it is always important to examine the market situation holistically. Additionally, the interpretation of trading volume varies by assets and markets, so it is essential to make judgments based on specific circumstances.


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