Volume Analysis

Discussion in 'Technical Analysis' started by -EntropyTrader, Aug 17, 2003.

  1. Volume validates price. So how does one engage in volume analysis? Looking for some simple and effective strategies.

    I use classical TA in addition to MA analysis. Price, Time, and Volume – those are the basics – my analysis usually covers the first two but not volume, and I suspect I’m missing out on something very basic.


    IMO volume not only validates price, but it dicates price. OBV and VWAP are great indicators of volume bias. When I scan the very first thing I look for are strong volume deviations. I compare closing volume to the 30 day average volume, and I focus on stocks that had large increases or sharp drops in volume. I see volume as the stock heart rate. There are many threads on here that cover volume, I've talked about volume, VWAP, OBV and how I use them in MA as well.
  3. Thanks for your replies. I was using an MA on volume, but didn’t find it to be very useful as MAs tend to lag. I’m going to experiment with OBV, A/D, and VWAP now. OBV and A/B supposedly act as leading indicators.
  4. Elder’s description of OBV:

    Anyone have any objections to this indicator?
  5. A/D (Accumulation/Distribution) = (Close-Open)/(High-Low) * Volume
  6. Comparing A/D to OBV, A/D seems to provide more depth.
  7. I have been following the A/D as of late and find it to be much better than OBV in confirming price direction which the different oscillators I use show.
  8. Yeah, OBV seems simple mathematically and looks like it trends much better on the one year charts that I usually look at. However, I prefer the additional depth that A/D provides since it accounts for the strength of the day’s direction.
  9. All I have been using lately is this:


    You can set the new high/low or breakout filters to screen based on the 3 day avg volume. It has cut the amount of charts I look at on a daily basis by 80%.

    I agree with you on volume. I think the majority of price action is random, so if you can use volume analysis as a tool to identify non-random movement I think your chances of success with certain type of trades (breakouts/breakdowns, etc.) is improved significantly.
    #10     Aug 17, 2003