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Volume indicator - is price movement on low volume better or worse?

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I didn’t want to latch on to the crypto discussion with this question so started up a new thread on volume indicators. I thought I understood this one but now I’m not sure. If price moves a big chunk higher with little or below average volume, Is this a more positive move than if the price moves up the same amount but the volume traded was also a lot higher than the previously traded volume levels.

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In my experience if the price of an asset moves with low volume then it is a 'weaker move' against when the price of an asset moves on high volume which to me represents a 'stronger move'. The volume tends to go with the trend. To me it shows how much conviction traders have on the trend in play. A word of caution here @Nelsy-Boy. Volume can be manipulated to make it look like there is higher volume to attract trades. 

I am not sure if you have come across the Volume Price Trend (VPT) Indicator? It shows the strength of the price change and the price direction of the asset in question. I am sure if you look this up then you will find plenty of material on this. 

I personally tend to look for an increase in volume when trying to identify trends both on the upwards and downwards.  If I see volume increasing as the price is increasing / decreasing then it is telling me that the trend is getting stronger. There are other indicators to consider but this is just one of many that can go into the 'basket' before making a final assessment / conclusion on whether the trend is strong enough to trade. 

So to answer your question, in my personal opinion, more times than not if the price moves a big chunk higher with little volume then this is not as positive as if the price moved with higher volume. So to summarise below:

  • Price moves upwards / downwards on low volume = Potential weaker move / trend
  • Price moves upwards / downwards on higher volume = Potential stronger move / trend
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Thanks. Yes for me the two most important indicators are 'Price Action' and 'Volume' when looking at identifying trends, establishing trends and giving consideration to whether it is a potential trade or not. 

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Guest Tech

There’s also that new one as shown under the blogs section. Useful! 

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