Volume is used for extra confirmation

 When the market has been sideways, then there is a breakout, usually we want to see that it is
supported by higher volume
 When a level breaks or when a trend is in progress

If market is moving up we should see more volume and if it sells off we should see less volume

 So when candle is green and increasing in size and the volume follows, we should expect the
market to continue higher

Volume dictates the trend

 Is determined by the amount of bid and ask of the stock price

o People that wants to buy or sell
 If a trend is followed by a large volume, it means the trend will continue
 If a trend is followed by a small volume, it means a trend reversal will likely happen
 If stock price increases but has very low volume, it means that the bulls aren’t serious and is a
sign of bearishness
 If Stock price decreases and has very low volume / decreasing, it might be a sign of bullishness
 If volume is high but the price just moves sideways, this actually says the stock is being
accumulated or being distributed
Volume spikes are categorized into 3 categories, we have to assess from the chart which one they could
be

Volume spike that indicates an overbought or oversold point

 Typically accompanied by a long price tail

 Depending on where the price is on the chart is it in overbought area or oversold area
 Trade the opposite of this apparently

Volume spike that indicates strong continuation volume

 This typically occurs after a reversal in the direction of the forming trend

Volume spike that indicates breakout is occurring

 Price breaksout of a consolidation range on strong momentum and volume

To compare the volume to previous days volumes, use the 20 MA to see how many times do the current
volume exceed the MA

 The more the volume is way above the MA, the stronger the volume spike for that day

Always ask myself does it make more sense that people would buy or sell at this price level to know
which volume spike is the market experiencing

A healthy trend typically has increasing volume in direction of the trend and then falling volume in any
retracement

 Watch the volume MA and see its ascending during upwards trend and descending towards
retracements

Consolidation typically has falling volume

 Meaning that if you believe price is consolidating but volume is increasing, then a move outside
of consolidation is likely

The volume moving average tends to increase during a reversal

Bottom heavy volume means theres lots of volume in the beginning of an uptrend which is a good sign

Top heavy volume means that the volume is weak in the beginning of the trend and increases at the end
which normally indicates reversal