Market analysis strategy using the relationship between price (Price) and trading volume (Volume) in financial trading, such as stocks or currencies. The goal is to identify strong and weak trends to make trading decisions (buy or sell).
1. The four columns in the image:
- Price (Price): Represents price movement on the chart (upward or downward).
- Trading volume (Volume): Represents the amount of trading (number of contracts or shares traded) over a specific period.
- Example: A practical chart showing price with trading volume.
- Conclusion: Provides an interpretation of the case and a trading recommendation (Long or Short).
---
2. Analysis of the four cases:
Each row in the image represents a different scenario based on price movement and trading volume:
Case One (Row One):
- Price: Upward (Green line moving upwards).
- Trading volume: High and rising (Green line moving upwards).
- Example: The chart shows a price increase with an increase in trading volume.
- Conclusion: ✅ "The upward trend is supported by an increase in trading volume. This is a good time to look for buying opportunities (Long)."
- Interpretation: When the price rises with an increase in trading volume, it indicates strength in the upward trend, as there is significant interest from buyers.
Case Two (Row Two):
- Price: Upward (Green line moving upwards).
- Trading volume: Low or decreasing (Red line moving downwards).
- Example: The chart shows a price increase but with low trading volume.
- Conclusion: ⚠️ "The upward trend is not supported by trading volume. This indicates weakness in the upward trend, so short positions (Long) should be closed when reversal signs appear."
- Interpretation: An increase in price without an increase in trading volume means that the trend may be unsustainable, and it may reverse soon due to low interest from buyers.
Case Three (Row Three):
- Price: Downward (Red line moving downwards).
- Trading volume: High and rising (Green line moving upwards).
- Example: The chart shows a price decrease with an increase in trading volume.
- Conclusion: ✅ "The downward trend is supported by an increase in trading volume. This is a good time to look for selling opportunities (Short)."
- Interpretation: A price decrease with an increase in trading volume indicates strong downward trend, as there is strong selling pressure from traders.
Case Four (Row Four):
- Price: Downward (Red line moving downwards).
- Trading volume: Low or decreasing (Red line moving downwards).
- Example: The chart shows a price decrease but accompanied by low trading volume.
- Conclusion: ⚠️ "The downward trend is not strong enough if it is not supported by an increase in trading volume, and there may be a potential reversal. Close short positions until additional confirmation signals appear."
- Interpretation: A price decrease with a decrease in trading volume means that the downward trend is weak, and there may be a bullish reversal soon due to lack of interest from sellers.
---
3. General summary:
- Strong trend (upward or downward): Needs support from high trading volume. If the trend is supported by trading volume, it is a good opportunity to trade in the direction of the trend (Long if upward, Short if downward).
- Weak trend: If the trend (upward or downward) is not supported by trading volume, it is unsustainable, and caution should be taken while looking for reversal signals.
---
4. How to benefit from this analysis:
- For traders: Use this analysis to confirm trends before making trading decisions. For example, do not enter a long position if the upward trend is not supported by trading volume.
- Risk management: If you are in a trade and notice that the trading volume does not support the trend, consider closing the trade to avoid losses when a reversal occurs.