Hi Chaitanya,
Think of volume as effort, and price action as result.
Thus for any large move(result) in any direction, you will need large volume(effort).
To bring the price down, you need either selling pressure or lack of demand.
Similarly, to move the price up, you either need demand or lack of supply.
Now, if the professional wants a rally, any selling into it(supply) will spoil the rally. So to make sure that supply is reduced, they try to "shake out" the shares from hands of weak holders like us and buy them. This helps in creating a supply-demand gap and the stock soon starts moving up. The shorts start covering their positions, the "herd" flocks to buy it, thus adding to the demand. This is the whole game.
From this you can infer that if volume is reducing as the price is going up(2 bars), you can comfortably tale a short position as the price is sure to reverse.
Similarly, when prices are falling on reducing volumes, you know that the selling pressure is reducing and soon you will find a long entry point.
Now, about those two statements in the previous post:
The professionals know that they getting anyone to sell their shares is not an easy task, especially when they are expecting higher prices. So they have to create some "fear" and panic everybody. So they just need a reason. For Today, China's index loss was enough a reason. Someday its monsoon worries, etc. Bear in mind that professionals are influential and they can manipulate many things - Ex: they can time the release of a "bad news".
The first markdown was within first five minutes with SENSEX losing 350 pts. Weak holders panicked and sold out their shares(and strong holders bought it). Just to make sure that supply has really reduced, one more markdown around afternoon was done to about -600 pts. This caused even the optimistic ones to panic and sell their shares.
So at the end of the day we closed in red. Now are the professionals REALLY interested in selling shares? To find out we take a look at the volume. The volume is not so great. Just in case you want to compare, compare it with the budget day volume. A huge drop in price is accompanied with the volume spiking over the previous 2 bars. This is a strong signal of professionals interested in selling! And you know very we cannot go against the professionals
Think of volume as effort, and price action as result.
Thus for any large move(result) in any direction, you will need large volume(effort).
To bring the price down, you need either selling pressure or lack of demand.
Similarly, to move the price up, you either need demand or lack of supply.
Now, if the professional wants a rally, any selling into it(supply) will spoil the rally. So to make sure that supply is reduced, they try to "shake out" the shares from hands of weak holders like us and buy them. This helps in creating a supply-demand gap and the stock soon starts moving up. The shorts start covering their positions, the "herd" flocks to buy it, thus adding to the demand. This is the whole game.
From this you can infer that if volume is reducing as the price is going up(2 bars), you can comfortably tale a short position as the price is sure to reverse.
Similarly, when prices are falling on reducing volumes, you know that the selling pressure is reducing and soon you will find a long entry point.
Now, about those two statements in the previous post:
The professionals know that they getting anyone to sell their shares is not an easy task, especially when they are expecting higher prices. So they have to create some "fear" and panic everybody. So they just need a reason. For Today, China's index loss was enough a reason. Someday its monsoon worries, etc. Bear in mind that professionals are influential and they can manipulate many things - Ex: they can time the release of a "bad news".
The first markdown was within first five minutes with SENSEX losing 350 pts. Weak holders panicked and sold out their shares(and strong holders bought it). Just to make sure that supply has really reduced, one more markdown around afternoon was done to about -600 pts. This caused even the optimistic ones to panic and sell their shares.
So at the end of the day we closed in red. Now are the professionals REALLY interested in selling shares? To find out we take a look at the volume. The volume is not so great. Just in case you want to compare, compare it with the budget day volume. A huge drop in price is accompanied with the volume spiking over the previous 2 bars. This is a strong signal of professionals interested in selling! And you know very we cannot go against the professionals
Very well explained Bro..... I might copy ur stuff and write a book on volume analysis
Thanks SO so much
