(LESSON:-3) VOLUME ANALYSIS:-SIMPLE TRADING CONCEPT . (STRATEGY:-2)

Strategy 2: Trending Stocks and Volume.

When a stock is moving higher in a stair-step approach, you will want to see volume increase on each successive high and decrease on each pullback. The underlying message is that there is more positive volume as the stock is moving higher, thus confirming the health of the trend.

This sort of confirmation in the volume activity is usually a result of a stock in an impulsive phase of a trend.

Trending Example 1:

The volume increase in the direction of the primary trend is something you will generally see as stocks progress throughout the day.  You will see the strong move into the 10 am time frame, a consolidation period and then acceleration from noon until the close.

For this strategy, you will want to wait for the trade to develop in the morning and look to take a position after 11 am. The idea is to wait for the trend to form, and then follow it with a low risk entry point.

As the stock moves in your favor, you should continuously monitor the volume activity to see if the move is in jeopardy of reversing.  The speed of this setup is much slower versus the other strategies discussed in this article; however, the difficulty reveals itself in the increased number of false moves, which can be commonplace in the afternoon.

Failed Examples

To help train your chart eye, here are a few examples of “joining the trend” that didn’t work very well. Along these lines, it’s always best to have stops in play. It never pays to force a trade.

Here, JKS failed to continue breaking down and simply went sideways into the close:

And here is another example of a breakout that simply goes sideways as well.

These charts are just a sample of what happens far too often when it comes to afternoon trading. Not all stocks will continue trending all day. It’s just a risk you must accept when trading late day setups. There are some exceptions to this with low float stocks, which we touch on in our vwap boulevard article.

In Summary

1. Look for volume to push the stock in the direction of the primary trend
2. You need to be prepared to hold a stock for multiple hours to reap the real rewards
3. Instead of using volume to predict which stocks will trend all day, simply use volume as an indicator that keeps you in a winning position.

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(LESSON:-2) Simple Trading Concepts For Beginner Using Chart Pattern…!!!

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NEXT POST I’LL COVER STRATEGY NO.3 ON VULUME ANALYSIS.

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