Beginners in Trading usually make decision by just looking at price. If the candle is green, near the price resistance and is moving fast, most traders think that break out of the price is setting on hand. But looking at price movement alone will not give us the overall picture. Volume can also provide us valuable contexte to grasp the market movement.
Lesson 7: Price and volume together can sometimes give a better picture of the set up. If price has gone up sharply, but volume doesn‘t support that move, trader should rather wait for confirmation than jumping on it immediately
So it doesn‘t mean that low volume is mean reversal signal. Volume interpretation can bechanged according to market, instrument and timeframe. So drawing conclusion after single low volume candle is can be risky.
This is an example of simple language indicating where the market is heading while the volume can aid in understanding the context of activity.
An agar trader only a price chase karta hai late entries jaise risk ko badhawa de sakti hai. Decision making bahar ke context mein volume ke saath incorporate bhi ki ja sakti hain.
The most fundamental way to gain understanding of volume is to watch market activity. When a price reaches at a key level and the volume swells, a trader can compare the activity with the previous activity to gain extra perspective on the move. Though, an increase in volume also, is not necessarily a buying indication.
If in the example resistance ke upar price move hota hai aur volume bhi increase hota hai. It can add further confirmation in breakout but don‘t assured about the success. The market can drop back straight to beneath that level.
If the low volume accompanies such a sudden rise in price, then waiting for more confirmation might be great for the trader. But even here it is not necessary that the low volume will always translate into the move being a fake one.
Understanding a lot more context than the signal is more important.
My own conclusion is that volume on its own as an isolated indicator is not the best approach, but combining it with price structure may prove a better paradigm to work in. We can therefore look at support, resistance, trend, candle structure and volume all at the same time.
Ek basic checklist ho sakti hai:
What is the minimum price at which a good is being sold?
How does it compare with current candle of volume previous?
Sometimes when a good candle appears on a chart, kabhi-kabhi a trader is instantly compelled to take such a trade. The price is moving very fast and is almost reaching the point where the trader feels, if I don‘t take an entry now, I will miss a good trade. At this point, there is the maximum risk of price chasing.
Let‘s say a bullish candle formed on price resistance ke upar and traders buy immediately without waiting for confirmation. The next candle falls back below the resistance with selling pressure so one can get caught in a breakout trap and be stuck.
Here volume may offer useful context. Trader may see whether activity at the breakout was significant relative to previous candles, and if price levels are held after a breakout.
But an important point to note is, that high volume doesn‘t have to be necessarily bullish. Selling can have high volume too, so trying to use high volume as an automatic answer for direction might just be flawed.
Lesson I got is that should focus on structure rather than hype of strong price action. Waiting for one more candle for confirmation could delay the entry but it could also help to avoid un-necessary chases.
A single view of price and volume together can make chart reading more structured but it does not imply that volume can predict the future. There will always be uncertainty in market. So it is dangerous to consider any indicator a guaranteed one.
Meri seekh is simple: Don‘t chase the price, try to understand the context behind the price. Volume could be an important part of this context, particularly around large levels, breakouts or strange move.
Next time a chart presents you with a huge candle, instead of taking immediate entry just ask yourself these questions: How is the volume compared to the last few candles? Is the price staying above an important level? Is the move coming with confirmation or is it just a sudden spike? And most importantly, is my predetermined setup actually completed?
Would be better to wait as agar answer not clear.
No single signal of high volume, low volume, green candle ya red candle should be treated as final. Assess the market structure, price action, volume and risk management together.
Here‘s a simple rule to avoid getting trapped in trades: Don‘t enter a trade excited because of the price.
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