How volumes and price plays an important role in decision making? – Praveen Pathiyil
Possibility 01– If there is an increase in stock price with rise in volume, it indicates that the market is busy in building the long position in the particular stock.
It helps traders and investors to analyzing trend. If volume is started to increase in an uptrend, it is usually a sign that the upward run has been started.
Possibility 02– If there is decrease in stock price with rise in volume,it indicates that the stock is building short position.
It helps trader and investors to monitor closely to form ideas on upcoming trend reversals. If volume is started to increase with the decrease in price, it is usually a sign end of upward trend and start of downward drift. (Downward is weak and lacking conviction)
Possibility 03– If there is rise in stock price with decrease with volume, it indicate that the stock is covering the short position.
It helps trader and investor to monitor closely to form ideas on upcoming trend reversal. If volume is started to decrease in an uptrend, it is usually a sign of short covering. (Upward is weak and lacking conviction)
Possibility 04 – If there is a fall in the stock price with decrease with volume, it indicate that the stock has bottom out, and it is prefect time to buy that stock.
It helps trader and investor to monitor closely to form ideas on upcoming trend reversals. If fall in volume is accompanied with the same trend in price, it is usually a sign that the downward run is about to end, and up trend is about to start.
CONCLUSION:
Volume and price of the stock have immense importance in forecasting the trend for the stock, in particular and market in general. Both, are closely interconnected. The in-depth analysis of volume and price is essential to understand the future price of the stock. Either, market can move up, or down. Indeed, detail analysis of price and volume plays a vital role in forecasting future trend for the stock or markets.
PRAVEEN PATHIYIL
Passionate equity investor, Experienced in Indian stock market over a decade. Expertise in forecasting trend. Speaker and writer about changing stock market and economic trends.
Founder of Pentad Securities, NSE, BSE Broker and Investment Advisor
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