Understand Trading Volume in One Minute! A Must-See for Newbies on Market Volume-Price Relationship

In the trading market, Trading Volume is an "unambiguous indicator"; it reflects real trading data and can directly demonstrate the strength of both buyers and sellers. Today, let’s use the simplest language to help everyone understand Trading Volume and the relationship between volume and price.~
1. What is Trading Volume?
The indicator name for trading volume is VOL. In the candlestick chart, the red bars represent the trading volume when the price rises, while the green bars represent the trading volume when the stock price falls. There are also the 5-day line and the 10-day line, which can help us observe the short-term trend of trading volume.
2. The 5 Forms of Trading Volume
Different trading volume patterns hide different market signals:
- High Volume Bar (Bearish): A sudden appearance of a huge volume bar, and the stock price rises, indicating a high probability of a decline in the future.
- Low Volume Bar (Bullish): Trading Volume hits a new low for the stage, extremely low volume, a trend change is coming.
- Volume Step (Bullish): Trading Volume increases step by step like a staircase, often accompanied by a rise in stock prices.
- Volume Shrinkage Bar (Bearish): The trading volume gradually decreases, indicating that market participants are reducing or their opinions are converging.
- Balance Volume: The buying and selling forces are basically balanced, and the market is in a state of equilibrium.
3. Core Mnemonic for Price-Volume Relationship (8 Response Strategies)
Remember these mnemonics, understanding the relationship between price and volume will no longer be difficult:
Volume-Price Patterns Market Signals Response Strategies
Volume increases and prices rise, the trend is healthy, and it's a good time to go long.
Volume increases while price decreases, bears are releasing, waiting for a signal to stop the decline.
Volume shrinks while price rises, insufficient buying pressure, reduce positions on rallies.
Volume shrinks and price drops, about to change direction. Prepare to enter the market.
Trading Volume flat price rise Main force controls the market Cannot open new positions.
The trading volume price drop continues to decline, with the market in a bearish trend, and those in cash are just watching.
Sky-high price, peak seen in this stage, take profit in batches.
Low Volume, Low Price - The Eve of Reversal, Small Position Testing
IV. Advanced Mnemonics (Must-read for Beginners)
- Break through the previous high, a rise with low volume indicates further increases, a rise with high volume needs observation, and retreat if there is a high volume but stagnation.
- Sudden increase in trading volume has its tricks; it's either a trap or weakness.
- A breakout at a key level should be accompanied by an increase in volume, and after the breakout, the volume should decrease.
- A breakthrough that encounters resistance is a true breakthrough, while an easy breakthrough is a false breakthrough.
Final reminder: Investment involves risks. The above content is for knowledge sharing only and does not represent any investment advice~
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