$USDC

Stock Price Behavior Analysis Course

Session Nineteen: The Basic Logic of Price-Volume Relationship

Price reflects trends, while trading volume reveals the underlying momentum and market sentiment. Today, we will establish the basic concepts of the 'price-volume relationship', which is one of the core understandings of price behavior.

⸻

1. Four Basic Types of Price-Volume Relationships

1. Price Up, Volume Up (Strong Uptrend)

　Buying pressure is strong, more participants are involved, the uptrend is supported, and the trend is healthy.

2. Price Down, Volume Up (Panic Selling)

　A selling wave occurs, with strong bearish forces, and the trend has a chance to accelerate downwards.

3. Price Up, Volume Down (Weak Uptrend)

　Although the price is rising, the willingness to follow up is low, which may indicate a false breakout or weak recovery.

4. Price Down, Volume Down (Consolidation or Reduced Selling Pressure)

　Sellers are weak, possibly entering a consolidation phase, or even showing signs of stopping the decline.

⸻

2. Changes in Volume Often Precede Price Changes**

• When the price has not yet broken through, but the trading volume begins to increase unusually, be aware that main forces may have entered the market early.

• If the price reaches a new high but the volume cannot reach a new high, it indicates a divergence in momentum, requiring caution.

⸻

3. Practical Applications

• Observing whether a breakout is accompanied by 'increased volume' is an important basis for distinguishing between true and false breakouts.

• Price and volume moving in sync indicates a healthy trend; divergence between price and volume often signals a turning point.

⸻

Volume is the fuel of price; if you understand trading volume, you can 'anticipate price'.