Wednesday, November 2, 2011

Nifty Analysis: - What are the Volumes in the stock market?

Buying and selling of stock activity done by person are measured as volumes in share market. Volumes can be defined as share traded (buy or sell) for the period of the day. For example if buyer buys 500 shares from seller then volume will increase by 500.

Following figures represents volume figures for each stock’s traded as Nifty gainers: -


Fig: volume figure


Below figure shows chart of NIFTY and shows buy and sell i.e. high and low vertical bar of volumes at the bottom of the diagram.


Fig: price and volumes on charts

It is represented as vertical histogram just below the price indicator as no. of share traded at different prices.

High bars on the volumes shows more purchase (interest of people) done on the stock whereas low bars on the volumes shows more selling of people done on the stock.

Volumes are basically totally independent of the price. So a volume adds a great value to be secondarily observed after looking at price. As long as volumes are increasing the current trend of the price will stay. This is the indicator that cannot be manipulated like the price.

Generally price and volume indicator should move hand in hand which means if price is increasing and volume is falling means it is an indication of red flag that current trend is going to reverse. In other words if price of the stock is high and volume of the stocks is low then it means interest of person have reduced in the stock and price of the stock will fall which is reverse in the trend.


Fig: trend from high to low


And vice-versa for low price and high volume.


Fig: trend from low to high


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