an indicator discussion..., page-47

Petafemto - I'll give you my opinion on volume - "Volume speaks Volumes" if you will pardon the pun.

The first thing I ever learned in the markets, which my Father taught me too many decades ago to remember now - was that you always have to watch the volume.

When I started as a trader some 11 years ago the first thing I learned when studying TA was the following - which I have said so many times on HC.

"High volume high price = educated sellers selling to uneducated buyers. High volume low price is educated buyers buying from uneducated sellers."

This principle works on all chart time frames but I find it particularly useful on daily and 5 minute.

On a daily chart you can see the build up of volume quite clearly and when a top is approaching vol. will generally go much higher and spike. It does this because of the fear and greed factor - The buyers have watched it run up and up and up and been afraid to jump in and then all jump in at the last minute because they think they are going to miss out and get hammered.

When it does that you know a top is near - and vice versa when prices are dropping. The buyers swoop in when the sellers can take no more pain.

I like it particularly when trading the SPI on a 5 min. chart. You can tell a bottom is near by the volume piling in. It will often drop off a little, then price will go a little lower. A lesser amount of volume but noticeable none the less will then follow and then up it will go.

The same happens when the highs are near. Vol. will spike, often followed by a little counter trend, then up will go again and catch those who think they are going to miss out.

Hope that helps.

I would love to have JD's Budgie trading plan though but I don't think he'll fess up on that one LOL