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Working with volumes (concept)

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The greater the volume, the greater the interest of market participants to this level, because the volume - the number of contracts (or shares) which have passed from hand to hand over a certain period of time. As you know, the basic meaning of the work on the stock exchange - the intention to become rich at the expense of other market participants.

The emergence of a large volume tells us that both professional traders and the "crowd" (small traders) took the position. At the same time, of course, the opportunity to make more informed decisions is available for the most knowledgeable market participants (investment firms, banks, hedge funds and so forth.).

The longer the price will be at the same level, the more errors and incorrect transactions will be made by small traders. Their applications will be happily absorbed by the major players.

I.e. price movement in a certain price range creates a balance, whose main task - accumulation of positions by large players - market professionals. Often, during the consolidation the major players are using a variety of manipulative techniques, that are forcing small traders to open unreasonable positions.

When markets are not interested in the current price (or important news comes out and market conditions change, either one of the parties is not interested in making transactions anymore), then clear imbalance appears - the trend.

The price starts to move in search of more “interesting” level, which suits the majority of market participants, the majority of buyers and sellers.

Here we come to the basic concept of the work with the volume. This concept is a transfusion of money from one large volume to another.

Once out of range, the movement, in most cases, lasts until the amount, equal or exceeding the original volume (the one that accumulated during the period of consolidation), will appear.

It should be understood that the trend (especially the first pulse of the trend movement), as a rule, is not created by new purchases, but by the closure of the old positions by small traders, who misjudged the market.

Due to the proper interpretation of volume, you can find the source of the traffic, the source of the emerging trend. With the same success you can identify signs of slowing trend and its possible reversal.

Often, it is not necessary to try to understand in which direction during the period of "savings" a major player moves. Many trading strategies are based on the expectation of leaving the consolidation and opening a position conservatively. We’ll talk about it later.


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