In the trading world, there is a lot of activity in the form of traded volume of stock, futures, cryptos, or currency. If you think it is the volume of a certain stock that decides the price movement you might be wrong.
It is not the volume alone that decides price movement, rather it is the difference between the supply and demand chain. This difference is always unequal to traded volume. This difference is directly proportional to the buy x buy sizes & sell x sell sizes in several candlestick timeframes.
Does it make sense when you say high volume but no price movement? Yes, it is possible in trading, it signifies that the trend is ending. This state will never stay longer, prices will either start going up or down with new trends. High volume may or may not affect price movement considerably. There are many other factors that play a counter role in deciding price direction.
Obviously higher volume of any trading stock means a higher price. But it does not imply to every stock, coin, or currency. The situation may reverse in the case when betting companies or market makers try to reverse the trend. It may result in consolidation. You may also define it as a lack of trend.
What Does High Volume But No Price Movement Signify
High volume but no price movement signifies lack of trend, end of a trend, beginning of a new trend, or reversal of a trend. It may also signify a high fear and greed index in the market. In this condition, traders are waiting to open positions or some are still holding.
Although activity is huge in the market, new buyers and sellers are still not entering. Brokers and banks are active in these hours to reverse the trend. So, retail traders are either waiting to buy more or sell.
Beware that sometimes the stock market dumps despite the high volume. It indicates that sellers are more active than buyers. It may reverse the trend as selling pressure is continuously increasing.
In simple words, if the stock price stays at the same number, it signifies that it will take a serious dive or jump soon. Forex, stock, or crypto markets are highly unstable. If there is a high volume with a 1-1 ratio of buy and sell, it’s seriously bad. It could be very risky to invest in such stock.
Should You Invest In Currency Pair with High Volume but No Price Movement
Expert traders recommend never investing in stock with no significant price movement upward or downward. It is seriously risky to invest in non-volatile stock with a 1-1 buy-to-sell ratio.
However, it may be a good indication of big price movement in the future. Always consider significant volume difference as key to investing in a certain stock.
In forex volume of any pair is regarded as a powerful indicator to predict trends. If the volume is high more buying and selling is expected. However, if the high volume is not initiating buying and selling activity, it is risky and non-volatile. It’s better to wait for more to get a clear trend line.
Does higher Volume mean Higher Price?
The volume of any stock indicates the number of people who own a particular stock. If a higher number of people are involved in trade, the stock will show high volume. This involvement may be both in selling or buying.
The higher volume of any stock does not always mean a higher price. It means more buyers and sellers are interested in owning this stock. If the price goes up along with volume, it signifies more buying. If the price is down but volume, it signifies more sellers.
Expert traders always look at price volume history before buying or selling any stock. High volume indicated If volume and price both are on increase, it means the stock is doing well to attract more buyers.
What Does High Volume Indicates
Higher volume indicates traders’ interest in a particular stock, trend, and price movement. It determines the number of shares, currencies, and stocks traded in the market. It also signifies volatility in the market. More buying and selling is expected in this stock. Price may also increase with the increase in trading activity.
Considering volume patterns helps traders to predict trends and price movement. It is important in forex, the stock market, and options trading. It also plays an important role in technical analysis to learn to trade.
Many charting tools such as on balance Volume and Killinger Oscillators are totally based on volume.
Does High Volume Mean Stock Will Go Up
Any sudden increase in Volume can seriously affect stock price and trading activity. If volume goes up it signifies that more buyers are entering interested in the stock. Similarly, it tells that investors want to increase the price by initiating more buying activity. If prices go up more buyers are engaged.
On the other hand, if prices go down with high volume, more sellers are entering the market. The investors are now taking out money. They have started selling stock. This would ultimately lower the volume sooner or later. It’s a risky point for any trader. It can make or break the whole game.
Is It Good To Buy Stock with High Volume
Stock with a high volume means it’s highly demanding. Investors are interested in owning this stock. On the other hand stock with low volume is less volatile, and dead. When it comes to buying high-volume stock, experts recommend considering the price, trend history, indicators, and other factors.
It’s not a wise decision to buy a stock only considering the high volume. If the stock has high volume but a low price, it would not be a good investment. It means traders are interested in selling. So consider price along with volume.
Frequently Asked Questions
What is the best volume Indicator for Stock?
In the forex market, the best indicator to read the volume of the stock is the Chaikin Money Flow indicator (CMF). It was created by Marc Chaikin. It is regarded as best because it calculates institutional accumulation distribution accurately. It is above the zero line when the market goes up, below the zero line when the market dumps.
What is considered good trading Volume?
Good trading volume varies in stock, forex, and crypto market. For the stock & Forex market, it should be 20$million to 25 $million. For crypto, volume in billions is considered good as BTC is mostly traded in billion-dollar.
To summarize, you can’t neglect the volume of a stock in trading. Expert traders never trade a stock or option without keeping eye on volume history. High volume means the particular stock is in high demand. It affects price considerably when the market is volatile.
But it may not affect the price when the market consolidates or the trend is ending. Beware of such points as they’re risky to open trade. But pro traders take positions from here also.