The term volume analysis defines the number of units exchanged in a specific time for stocks and future stocks. Many traders rely on volume analysis since it tells them the liquidity level of a particular asset. That also tells traders how easily they can get in or out of position near the current price.
Buying and selling volume analysis
Stocks with higher volume will make the traders have an easier way to buy or sell the stocks, regardless of the quantities. That is because there are a lot of active traders in the market. They are waiting for your stocks if you sell, and vice versa.
When the price is pushed higher, then the buyer has the control. Buy volume happens at the offer price. It represents the lowest price where sellers willing to get. It also shows that there is someone who desires to buy the stock.
Conversely, if the price is pushed low, then the seller is on control. Sells volume occurs in the bid price, representing the highest price the buyers want to take. This shows that the seller does not desire the stock.
You can see volume at the bottom of the stock price. The volume bars on the daily chart tells the number of shares exchanged during the course each day.
Volume bars are sometimes colored. Red color shows the price declines at that period. If that happens, then the market considers it to be a selling volume.
The green bar, on the other hand, shows the price is rising in that period. Then, the market considers it to be buying volume.
Relative volume
Day trader stocks usually like to trade high volume stocks as it allows them to get in or out of a position faster, regardless of their position.
The average volume statistic tells the number of shares exchanged on a normal day. There will be days with high volume and low volume.
Remember to always pay attention to those days with high volume. That days have volatility and large price moving either up and down. A lot of sell volume means the price will go lower.
If the volume are mostly buy volume, the stock price will moves higher. It shows many traders want to have the stock.
There are factors that drive the increasing volume. The most common factor is news release or active traders who are worried or euphoric about the possible stock potential.
