65-Day Academy · Day 10 · Reading Charts
Volume Confirms or Denies Price
What volume measures
Volume = shares traded in the period. It is participation: how much money cares about this price right now. Price tells you WHAT the market thinks; volume tells you HOW CONVINCED it is. The two must be read together — price without volume is a rumor; price with volume is a fact.
The four confirmations
1) Uptrend + rising volume = healthy demand. 2) Uptrend + falling volume = rally running out of fuel (distrust it). 3) Downtrend + rising volume = genuine selling. 4) Downtrend + falling volume = sellers exhausted (watch for base-building). The classic rhyme: "volume precedes price" — big money leaves footprints in volume before price fully turns.
Relative, not absolute
Volume is meaningful only relative to ITS average (20-day average volume is the standard). "High volume" = 1.5–2×+ the average. Also know the rhythm: volume spikes at the open and close, sags midday — a 2× midday spike is far more unusual than a 2× opening spike.
What you'll practise
A stock rallies 3 days on volume 0.6× its 20-day average, then falls hard on 2.5× average. Read?
20 XP in the app · intermediate
Sources
- Volume AnalysisInvestopedia
- A Complete Guide to Volume Price AnalysisAnna Coulling
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All lessons are for educational purposes only and are not individualized financial advice, a recommendation, or a solicitation to buy or sell any security. Options involve substantial risk and are not suitable for every investor.