Volume analysis

from Wikipedia, the free encyclopedia

The volume analysis is a branch of technical analysis . The essence of volume analysis is the emphasis on volume in order to classify a price history as strong or weak. The basic rule applies: "The price cannot go far without the volume confirming the direction."

target

Volume analysis is the study of price behavior under the influence of trading volume. The aim is to gain an insight into the supply and demand structure in order to forecast future stock exchange prices. Strong stock market trends should always have increased volume in the direction of the trend. Would z. If, for example, the trading volume decreases in an upward trend, it can be assumed that demand will also decrease. This makes it possible to identify trend weaknesses at an early stage and to take appropriate precautionary measures.

Tape reading

Tape reading is the pioneer of volume analysis . Richard D. Wyckoff (1873–1934) was the first to systematize tape reading. The techniques are old, but fully valid. At that time, a ticker tape was used to transmit rates. The ticker band contained the stock symbol, the price and the trading volume used . Wyckoff defined tape reading as the "art of determining the immediate price trend" .

Basic principles of volume analysis

  1. A healthy rising price trend has increasing volume. In between there are setbacks with reduced volume. A healthy falling price trend also has increasing volume. Only in this case is the falling movement endowed with more volume.
  2. A sudden spike in volume indicates a high level of emotional participation by market participants. The volume peaks have a short-term stopping effect on the price movement.
  3. Tired price progress with no volume indicates a lack of interest on the part of market participants. In such a case, there may be rapid reversals. The market is difficult to forecast - it needs new impulses to attract new market participants.

The three forms of volume activity

  1. Increasing volume below a rising price with intermittent setbacks. The resets have reduced volume. This is a healthy upward trend. (Vice versa for the downward trend)
  2. Increasing volume at a constant price. The market has a distributive behavior. A possible course reversal is being prepared.
  3. A weak volume and a tired course progress. A low supply meets a low demand. The market is characterized by technical false signals and rapid, insignificant reversal patterns.

Advantage of volume indicators

Volume indicators are independent of the price of the trading object. When a technical analyst studies a chart, the chart is made up of four parameters: opening, high, low and closing price. However, if the analyst also uses the volume, he receives another analysis parameter that increases his probability of success. The relationship between price and trading volume is complex and overwhelming in terms of volume. Important information could be overlooked. Volume indicators link price and volume and help the analyst with his trading decision.

literature

  • Richard D. Wyckoff: Tape Reading and Its Maximal Interpretation for Stock Market Profits. The Library of the Great Stock Market Classics, American Classical College Press, 1983, ISBN 0892664126 .

Web links

Individual evidence

  1. ↑ Volume Trend Indicator (VTI). July 31, 2008.
  2. ^ Richard D. Wyckoff: Studies in Tape Reading. Publisher Cosimo, Inc., 2006, ISBN 1596059591 ( limited preview in Google Book Search).