How does trading volume affect stock prices?
Generally speaking, the relationship between trading volume and stock price is reflected in the following two situations:
Volume and price are in the same direction: that is, the stock price and trading volume change in the same direction. When the stock price rises, the trading volume also rises, which is a sign that the market continues to be optimistic; when the stock price falls, the trading volume decreases, indicating that the seller is optimistic about the market outlook and is reluctant to sell, and there is still hope for a rebound.
Volume-price divergence: that is, the stock price and trading volume show opposite trends. When the stock price rises but the trading volume decreases or remains flat, it means that the rising trend of the stock price is not supported by the trading volume, and this upward trend is difficult to maintain; when the stock price falls but the trading volume rises, it is a precursor to a downturn in the market outlook, indicating that investors are afraid of disaster. Sell ??out of the market.
"After the three major battles, the national army was completely defeated and retreated to the south bank." The results obtained after heavy trading volume will form a support line or resistance line for a long time. Unless a bigger situation occurs, it generally does not Will break through this support line or resistance line. Since June 2014, the stock market has continued to rise. Now it is over 3,200 points, and the rise has slowed down. Some people on the Internet say that China's economy is not in good shape, its manufacturing industry is bleak, and it will soon fall sharply.
It should be noted that the market trading volume usually refers to the transaction amount. Describe market activity and capital size. Trading volume and transaction amount are expressed by the following formula:
Transaction quantity (transaction volume) * transaction price = transaction amount (transaction amount). Trading volume refers to the specific number of transactions within a certain period of time. How to judge the stock market situation through the transaction rate?
First of all, trading volume can be said to be the momentum of the stock price.
Before a stock rises wildly, it is often followed by a long-term decline or consolidation. In this way, after the trading volume shrinks significantly, there will be continuous amplification or moderate increase, and the stock price will rise. A stock with increased trading volume at the bottom is like a rocket that must have sufficient fuel before taking off. It must have sufficient bottom power to push the stock price to extremely high levels. Therefore, a skyrocketing stock must have a large trading volume at the bottom. In the early stage of the rise, the trading volume must continue to increase and the volume and price should be coordinated. After the main rising period, there is often a so-called unlimited surge in price and volume.
From the actual illustration, we can see that a stock that will rise sharply must have sufficient bottom power to push the stock price higher. The sufficient huge volume mentioned here is relative to the trace volume in the past. That is to say, when the trading volume of a stock shrinks extremely, a continuous large amount can push up the stock price. Trading volume is a tool to measure buying and selling momentum. It can confirm the direction of stock price. Therefore, smart investors must track stocks with huge trading volume at the bottom, because when the supply and demand relationship of a stock changes greatly, When changes occur, the direction of the stock price will be determined. Investors must not ignore the relationship between stock price and volume when such changes occur. Once the price and volume cooperate, the stock price will inevitably rise as rapidly as expected after intervention.
Changes in trading volume will be a precursor to a trend reversal. In the early stages of a stock's rise, the relationship between its trading volume and its stock price is that the price increases slightly, while the trading volume continues to increase, and the stock price also rises with the increase in trading volume; once it enters a strong main rise period, an infinite madness may occur. At the end of the rising period, there is a divergent trend of increasing volume and falling prices, while decreasing volume and rising prices. Once the stock price falls below the 10-day moving average, it indicates that the strength has changed and will enter the mid-term consolidation stage.
Therefore, when you hold a strong stock, it is best to keep a close eye on the daily K-line chart of the stock price. The daily K-line has always remained above the 10-day moving average, and you can hold it all the way; once the stock price falls below the 10-day moving average with a long mark or market trend, you should ship immediately and consider stock exchange operations.
Special attention should be paid to stocks that have completed consolidation because their opportunities outweigh their risks. The trading volume at the end of the consolidation shrinks, which represents the exhaustion of selling power. Basically, volume shrinkage is a reversal signal. Only volume shrinkage can stop the decline. In a downward trend, trading volume must gradually shrink before there is a chance for a rebound. However, after the volume shrinks, it may shrink again. When will the bottom be? The bottom can only be confirmed after the volume shrinks and then on the day when the volume increases. If the stock price is already above the 10-day moving average at this time, it will be more confirmed that its upward trend has begun.
So, basically what we should pay attention to is the increase in volume after the decrease in volume. Only an increase in volume can reflect the change in supply and demand, and only an increase in trading volume can give the stock the bottom momentum to rise.
At the end of the session, the stock price trend has the following characteristics: 1: The fluctuation range gradually narrows. 2: Scale down to the extreme. 3: After the volume shrinks, the volume increases. Suddenly one day, the volume increases sharply, and the market breaks out of the Zhongyang line, breaking through the stock market, and the stock price stands above the 10-day moving average. 4: The trading volume continues to increase, and closes the positive line, plus the principle of leaving the bottom price for three days. 5: After the breakthrough, the moving averages began to turn into a long arrangement, while the moving averages overlapped during the consolidation period.
Secondly, the status of trading volume in deceptive things has always been auxiliary. It cannot be used as a basis for direct decision-making. Many people think that we deliberately neglect the trading volume indicator. This idea is wrong.
What lies behind is the efficiency of speculation. If the trading volume indicator can improve our speculation efficiency, why don’t we put it in our toolbox? On the contrary, if it cannot bring us efficiency, why should we use it? What?
Please see, this is the performance of trading volume, the performance of the price when it fell to 1311 points. On the day before it, the trading and price hit a new low, and the price the next day When it continues to hit new lows, the trading volume has rebounded. At this time, can we use it to judge that the market has turned? If this feature represents a major turning feature of the market, then please see Figure 2, which gives a complete picture. On the contrary, the price here hit a new low and the transaction did not rebound. On the contrary, when the price continues to rise, the transaction volume shrinks further. It is not until the price crosses the neckline of the W bottom of the traditional form that the transaction volume increases rapidly.
Trading volume has an inherent lag, so don’t believe in the noise that volume precedes price. It must be made clear that trading volume is a "derivative" of price, and market capital is the pursuit of price - bidding or selling causes price fluctuations, not the pursuit of trading volume. Therefore, the primary function of trading volume is to screen the market. capacity, and market liquidity. In addition, it has some effect in verifying the validity of some inflection points, but we cannot fundamentally determine how big this effect is.
Despite this, we are still pleased to see some facts, which give us some clues, but optimism must be preceded by caution.
When an inflection point occurs, the base day of this inflection point tends to have a shrinking trading volume. Through research on some important market turning points over the past 10 years, we have found that this situation occurs frequently, with a probability of more than 80%.
This situation shows that when the turning point comes, market sentiment is extremely sluggish, and most people in the market are heartbroken. They have formed a consistent view of the market at this moment. This kind of pessimism Emotions are spreading wantonly, constantly hitting every participant, and the performance of these participants in the market is passive "refuse to trade", which is the reason for the sluggish trading volume. But once the market turns around, people's attention will be attracted immediately. People who are unprepared will be surprised, pay attention, and wait and see. Experienced people will intervene immediately, while professional traders will move all positions. In this way, the price will continue to rise until those who wait and see intervene and those who are full positions exit, and what remains on the chart is the enlarged trading volume and the price far away from the turning point.