17. The Volume Price Confirmation Indicator

“It is arguable that volume does not only depend on whether the market is rising or falling but also on a variety of market conditions. Volume behaves differently in markets characterized by upward trend, downward trend, consolidating movement, continuation rally, counter-trend rally ect. The second caveat is that it is not the sign of the price change but rather the sign of the trading volume that matters.”

—Professor Imad A. Moosa, Is The Price-Volume Relation Asymmetric? Cross Sectional Evidence From An Emerging Stock Market, 2006

So far, I have studied several different ways to use volume indicators. As market action unfolds, each indicator has its own unique calculation representing the daily interactions between supply and demand. However, institutional accumulation and distribution patterns are based not so much on these day-to-day movements. Rather, their trading activities are strategically orchestrated through the larger course of market trends. Thus, perceiving volume in this context, the trend is the ideal way to capture the underlying forces being built up within the market. Short-term market actions can be misleading, sometimes deliberately so. Yet over the longer term context of market trends, intuitional behaviors are inevitably revealed. Given these pa....