trading tutorial helps trading in the commodity market and stock market

Reading Stock and Futures Charts - continued

How To Analyze Volume Waves


Volume waves make it easy to see trends in volume. Individual volume bars differ in whether the price associated with that volume increased or fell in addition to the amount of shares traded. Volume waves group all the volume where price is moving in the same direction and sums the volume during that period. This makes it possible to compare one period of up vaolume with another and with one period of down volume to another. This can help pick the best time to enter trades when, for example, selling volume peters out.


This volume wave, in the middle of a trading range (this is not marked on the chart), is high and shows an abundance of selling pressure.


Here the price is a bit lower than the earlier wave but the volume is a little lower too. Selling pressure has diminished. But, it's too early to enter a trade because the volume wave is still pretty high.


After price increased, the first reaction occured on significantly lower volume. This is the first buying opportunity.


Price is even higher while the volume wave is the lowest in this series. This is also an excellent buying opportunity because it shows that there is very little selling pressure left.

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