Trading volume is the key to investment! If you don't understand it, you deserve to be cut!
Today, I must take you through the most hardcore indicator in the financial circle - trading volume! Don't be fooled by its mundane name; it is the 'trump card' of major funds. If you can't understand trading volume, trading stocks or cryptocurrencies is no different from throwing dice with your eyes closed!
1. What exactly is trading volume?
In simple terms, it refers to the total number of trades in the market over a certain period, such as a day. The larger the trading volume, the more active the market is; the smaller the trading volume, the more stagnant it becomes like a dead pond.
2. What can trading volume do?
Check market heat: When trading volume explodes, prices can skyrocket or plummet in a minute; when trading volume is weak, prices lie flat as if paralyzed.
Understand the major players' strategies: When there are more active buy orders, the buyers have the upper hand, and prices may rise; when there are more active sell orders, the sellers call the shots, and prices may fall.
Predict price movements: Rising volume and price indicate bullish trends, while falling volume and price indicate bearish trends. The most critical situation is when volume increases but price decreases - this usually means that major players are quietly accumulating goods, so keep a close eye!
3. Trading volume patterns hold secrets
Shrinking volume: The market is quiet, and everyone agrees; a trend change may be imminent.
Bottom volume: Trading volume drops to the floor, and a rebound could happen at any moment.
Expanding volume: The market is in chaos, with fierce battles between bulls and bears.
4. Trading volume tips, remember these three points!
Volume precedes price: Changes in trading volume often happen before price changes; this is a hard rule!
Keep an eye on moving averages: If the moving average of trading volume is rising, it’s highly likely to go up; if it's falling, it’s time to run!
Compare with historical data: A sudden surge in trading volume surely indicates something big is happening; it's either an opportunity or a trap!
Lastly, let me tell you a hard truth: Trading volume is the 'footprint' of major funds. Learning to read trading volume allows you to grasp the movements of major players; otherwise, you deserve to be cut!
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