Comments on: Volume and its Meaning http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/ Investing Online Made Easy Tue, 16 Mar 2010 19:43:11 -0400 http://wordpress.org/?v=2.8.4 hourly 1 By: Stock Charts, Understanding the Basics | Stock Trading To Go http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-57946 Stock Charts, Understanding the Basics | Stock Trading To Go Thu, 17 Jul 2008 20:29:29 +0000 http://falkininvesting.com/blog/?p=21#comment-57946 [...] - Volume is extremely important as it helps determine market momentum. Each bar represents one day, and the [...] [...] – Volume is extremely important as it helps determine market momentum. Each bar represents one day, and the [...]

]]> By: MeanReverting http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-42488 MeanReverting Thu, 03 Apr 2008 15:48:10 +0000 http://falkininvesting.com/blog/?p=21#comment-42488 Blain, I have no idea what you were trying to say in your article, simply because this simple supply-and-demand economic theory is too obvious to me and your points make no sense at all. "Power of influence"? Strong demand (more people biding on one stock, for the sake of simplicity here) most likely powers the price up. Volume does not necessarily indicate how strong the demand is, because volume is in past time and demand is a future force. For instance, one stock increases 50% during one trading day and volume is 10 times average, will you buy this stock at 9:30am the next day given your only reason is the huge volume? In theory, stocks follow a Brownian Motion, which basically means independent of what happened in the past. Volume is just a simple measurement of how active the market WAS. However, this "active" could be both good and bad under normal circumstances. If news is neutral, in one trading day, +5% and -5% on one stock price would most likely create the same volume. Again, volume measures what happened before and is weakly correlated to future stock price movements. High volume does not necessarily show strong investor confidence or market demand. It however indicates the degree of investor anticipation mixture in the past. Volume is resulted from trading which includes both buying and selling. When the stock price meets BOTH buyer and seller's interest, that is where the trade happens and volume is created. Under an extreme situation, if everyone thinks the price will keep going up, there will be no seller, and therefore no volume will be created. It does not make sense and is irresponsible to say that high volume indicates a likely price increase. Back to the cookie thing, you and your friends will probably only ask for cookies if only you knew the cookies were "good". If you knew the cookies were "bad", less likely your friends would still ask for cookies with you. On the other side, if the moms want to get rid of some old cookies, she may just throw them to you without being asked at all. My point is, ultimately, the quality of the cookies drives the number of friends wanting to ask for them with you and whether or not the mom wants to give to you, not the other way around. Also, the number of friends asking for cookies is not "volume". It shows the demand which is a future force. Apparently, comparing stock volume and this cookie thing is like comparing apple to orange. They all look round, but are totally two different things. Welcome to discuss!! Blain,

I have no idea what you were trying to say in your article, simply because this simple supply-and-demand economic theory is too obvious to me and your points make no sense at all.

“Power of influence”? Strong demand (more people biding on one stock, for the sake of simplicity here) most likely powers the price up. Volume does not necessarily indicate how strong the demand is, because volume is in past time and demand is a future force. For instance, one stock increases 50% during one trading day and volume is 10 times average, will you buy this stock at 9:30am the next day given your only reason is the huge volume? In theory, stocks follow a Brownian Motion, which basically means independent of what happened in the past.

Volume is just a simple measurement of how active the market WAS. However, this “active” could be both good and bad under normal circumstances. If news is neutral, in one trading day, +5% and -5% on one stock price would most likely create the same volume.

Again, volume measures what happened before and is weakly correlated to future stock price movements. High volume does not necessarily show strong investor confidence or market demand. It however indicates the degree of investor anticipation mixture in the past. Volume is resulted from trading which includes both buying and selling. When the stock price meets BOTH buyer and seller’s interest, that is where the trade happens and volume is created. Under an extreme situation, if everyone thinks the price will keep going up, there will be no seller, and therefore no volume will be created. It does not make sense and is irresponsible to say that high volume indicates a likely price increase.

Back to the cookie thing, you and your friends will probably only ask for cookies if only you knew the cookies were “good”. If you knew the cookies were “bad”, less likely your friends would still ask for cookies with you. On the other side, if the moms want to get rid of some old cookies, she may just throw them to you without being asked at all. My point is, ultimately, the quality of the cookies drives the number of friends wanting to ask for them with you and whether or not the mom wants to give to you, not the other way around. Also, the number of friends asking for cookies is not “volume”. It shows the demand which is a future force. Apparently, comparing stock volume and this cookie thing is like comparing apple to orange. They all look round, but are totally two different things.

Welcome to discuss!!

]]> By: Blain Reinkensmeyer http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-39653 Blain Reinkensmeyer Fri, 15 Feb 2008 17:05:07 +0000 http://falkininvesting.com/blog/?p=21#comment-39653 The price would most likely do down then. Your understanding is basically right on the money. The more people that buy the stock at the same time, the higher the price will go. For example, when a stock announces it is going to be bought for $100 a share when it is currently trading at $80 a share, do you have 5 days to grab shares at $80 before it shoots to $100? No way. Within 10 minutes the stock will be trading at $100 a share, why? Huge demand, limited supply, stock goes up in price. The price would most likely do down then. Your understanding is basically right on the money.

The more people that buy the stock at the same time, the higher the price will go. For example, when a stock announces it is going to be bought for $100 a share when it is currently trading at $80 a share, do you have 5 days to grab shares at $80 before it shoots to $100? No way. Within 10 minutes the stock will be trading at $100 a share, why? Huge demand, limited supply, stock goes up in price.

]]> By: denise http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-39500 denise Mon, 11 Feb 2008 02:52:16 +0000 http://falkininvesting.com/blog/?p=21#comment-39500 :?: i'm not sure i understand. so are you saying even if more people are selling their shares of a particular stock than it is people buying, that this is going to make the total daily volume go up and also cause the price of the stock to go up? what if people are selling because they are trying to get rid of it. so why would the price go up? :?: i’m not sure i understand. so are you saying even if more people are selling their shares of a particular stock than it is people buying, that this is going to make the total daily volume go up and also cause the price of the stock to go up? what if people are selling because they are trying to get rid of it. so why would the price go up?

]]> By: Blain Reinkensmeyer http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-38369 Blain Reinkensmeyer Fri, 18 Jan 2008 15:42:10 +0000 http://falkininvesting.com/blog/?p=21#comment-38369 Hi Pavitra, Are you asking in regards to interpreting volume? With or without strong volume, no investor truly knows a stock's share price is going to increase (as that would be fortune telling to an extent). The way traders make money is by studying historical patterns and data and uses it to make an "educated guess" as to whether or not the stock price is going to go up. Hope that helps! Hi Pavitra,

Are you asking in regards to interpreting volume? With or without strong volume, no investor truly knows a stock’s share price is going to increase (as that would be fortune telling to an extent). The way traders make money is by studying historical patterns and data and uses it to make an “educated guess” as to whether or not the stock price is going to go up.

Hope that helps!

]]> By: pavitra http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-38345 pavitra Fri, 18 Jan 2008 08:37:39 +0000 http://falkininvesting.com/blog/?p=21#comment-38345 how can we know that company shares price are going to increase? how can we know that company shares price are going to increase?

]]> By: Blain http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-30756 Blain Fri, 10 Aug 2007 14:24:49 +0000 http://falkininvesting.com/blog/?p=21#comment-30756 If you purchased the exact 100 shares that the somebody was selling, volume only increases by 100. But, if somebody sells 100 shares of Google and completes the order, than a few minutes later you go and buy 100 shares of Google, volume will increase by 100 again so 200 total since they are two separate transactions. Hope that makes sense. If you purchased the exact 100 shares that the somebody was selling, volume only increases by 100. But, if somebody sells 100 shares of Google and completes the order, than a few minutes later you go and buy 100 shares of Google, volume will increase by 100 again so 200 total since they are two separate transactions. Hope that makes sense.

]]> By: vaibhava http://www.stocktradingtogo.com/2006/03/21/volume-and-its-meaning/comment-page-1/#comment-30745 vaibhava Fri, 10 Aug 2007 08:10:48 +0000 http://falkininvesting.com/blog/?p=21#comment-30745 Hi There......... thanks for your informative article... I have a small doubt on the stock volume... If somebody selling 100 shares of Google and I buy these 100 shares then the total volume on Google is increased by 200 shares? or 100 shares? Best Regards, Vaibhava Hi There………

thanks for your informative article…

I have a small doubt on the stock volume…

If somebody selling 100 shares of Google and I buy these 100 shares then the total volume on Google is increased by 200 shares? or 100 shares?

Best Regards,
Vaibhava

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