Basic Technical Analysis From The Butcher, page-44

I have ruminated further on this little volume volatility pickup of mine. Likely I'm regurgitating something that is already available on the interwebs but as the saying goes: "beware of unearned wisdom".

It seems to me that my little concept of volume volatility works in line with "laws" of supply and demand. The more of either in a market the less volatility there is, and vice versa. So consider that your shares are avocados on a supermarket shelf. In times where millennials don't need avocados (generally when they are sleeping) they rest dormant on the shelf. The full range of quality is there. Ripe ones, rotten ones, small ones, big ones etc. Come breakfast time an increasing amount of bearded hipsters come through the door and begin to take their share of the avocados. obviously they take the best and cheapest ones available to them first. As we roll on closer and closer to lunchtime as the tattooed drummers and rock ukulele players wake up they options available to them diminish and they are left with poorer quality, higher priced avocados. However, as supply and demand dictates, they are forced to pay and take what is on offer to them, lest we have hipsters go without their omega 3s. We now roll on past lunch time and a time poor barista comes rushing in to collect what ever fetid green balls are available to him to serve mashed on toast with vegemite for $20 dollars at his cafe (the deliveroo drivers are on they way you know!). Eventually all the avocados are gone and the price can reach whatever point it wants for the remaining avocados, hagged ice addicts who are still convincing themselves they can quit any time, buy up whatever is left over.

As all this is happening the fruit and veg managers order their stock for tomorrow but of course we have a time delay for the new supply as the owners of the new avocados digest their guacamole before they require new ones.

The reverse and inverse is also true for all of this, but of course I cant get an analogy going for that. Point is, as the new owners are exchanged this creates spikes of volatility that is reflected in the price and the increasing/decreasing volume. But obviously there is only a certain amount of players in the market and as they sell/buy, they effectively exit the market, along with their shares, forcing any late players to the market to accept whatever price is offered to them which creates the volatility and price dips and spikes.

This will definitely something I'm going to dig into deeper over the coming weeks.