There is a famous saying in the stock market: "The ducks know first when the spring river warms," which emphasizes the importance of volume over price. Many investors are aware that trading volume is a crucial indicator, and where there is a concentration of trading volume, there are bound to be market hotspots. However, after years of stock trading, do you truly understand trading volume? From the painful data that nine out of ten people lose money in stock trading, we can easily conclude that many people understand that trading volume is the driving force behind price changes, and its position in practical technical analysis is immeasurable. But most people are still unclear about the rules of trading volume changes. Only by understanding the trading volume and following the market can one avoid being deeply trapped and losing money. Below, the author shares a unique skill in observing trading volume based on years of practical experience, hoping it will be helpful for everyone's operations.

Application of Volume-Price Divergence

In the intraday trend of the market, the "red columns" and "green columns" that investors see are also called active buying and selling orders, which are important volume indicators to verify whether the rise and fall of the intraday trend will continue.

Dow Theory states "volume confirms the price trend," highlighting the importance of trading volume to price trends. Therefore, active buying and selling orders are crucial for verifying the turning points of the trend in the market.

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Detailed Explanation of the Relationship Between Volume and Price in Stocks

8 Rules of Volume-Price Relationship

1. Definition of the Volume-Price Relationship

(Note: The original text seems to be cut off at the end, so the translation ends here as well.)Volume refers to the transaction volume of a stock within a unit of time, such as daily volume, monthly volume, and annual volume; price refers to the price of a stock, based on the closing price, as well as the opening price, highest price, and lowest price. There is a certain internal relationship between the rise and fall of a stock's price and its transaction volume. Investors can analyze this relationship to judge the situation and buy or sell stocks.

2: Volume-Price Relationship

The so-called volume-price relationship refers to the synchronous or divergent relationship between transaction volume and price.

1. Volume and price move in the same direction. The direction of change in stock prices is the same as the direction of change in transaction volume. When the stock price rises, the transaction volume also increases accordingly, which is a sign that the market continues to be optimistic; when the stock price falls, the transaction volume decreases accordingly, indicating that the sellers are optimistic about the future market, holding their positions and reluctant to sell, and there is still a great hope for a rebound in the trend.

2. Volume and price diverge. The stock price and transaction volume show an opposite trend of change. When the stock price rises but the transaction volume decreases or remains the same, it indicates that the rise in stock prices is not supported by the transaction volume, and this upward trend is difficult to sustain; when the stock price falls but the transaction volume increases, it is a sign of a future downturn, indicating that investors are afraid of disaster and are selling and leaving the market.

3: Basic Meaning of Volume Ratio

1. The volume ratio takes 1 as the critical point. When the volume ratio is greater than 1, it indicates that the average transaction volume per minute on that day is greater than the average value of the past five days; when the volume ratio is less than 1, it indicates that the transaction volume on that day is less than the average level of the past five days.

2. A volume ratio below 0.5 times is extremely reduced volume, especially after a stock breaks through an important resistance level with increased volume, and then reduces volume during the pullback, it is often a rare buying opportunity.

3. A volume ratio between 1.5-2.5 times is a moderate increase in volume. If the stock price is also in a moderate and slow rise, the upward trend is relatively healthy, and you can continue to hold the stock; if the stock price falls, it can be determined that the downward trend is difficult to end in the short term, and from the perspective of volume, it is advisable to consider stopping losses and exiting.

4. A volume ratio between 2.5-5 times is a significant increase in volume. If the stock price correspondingly breaks through important support or resistance levels, the probability of the breakthrough being effective is quite high, and corresponding actions can be taken.5. When the trading volume exceeds five times the normal level, it is considered abnormal volume, and investors should be highly vigilant, especially for stocks that have already risen.

4: Main Manifestations of the Relationship Between Volume and Price

1. When the stock price starts from a low level and rises with the increasing trading volume, it is a normal characteristic of a market uptrend. This relationship of rising price and increasing volume indicates that the stock price will continue to rise, and most investors recognize the investment value of the stock. This is a holding signal.

2. After a period of consolidation, if the stock price rises again and breaks the previous high, but the overall trading volume does not reach a new high, the trend of this rise is not stable. It is generally a false breakthrough and may even be a potential signal of a trend reversal. This is a selling signal.

3. In an uptrend, if the stock price continues to rise while the trading volume gradually decreases, it indicates insufficient upward momentum, and the trend may reverse at any time. However, if the main force has a high lock on the low-position chips, it is a different case. This is a selling signal.

4. If the stock price gradually rises with an increase in volume, and then suddenly increases rapidly with a huge volume for a day or several days (a last gasp, reverse temptation to lure more goods), followed by a significant reduction in trading volume and a sharp drop in stock price, this phenomenon indicates that the stock's rise has reached its end, the upward momentum is weak, and the trend is exhausted. If the previous increase is large, it is a reversal signal; if the previous increase is not large, it is a washing signal. In both cases, this should be a selling signal.

5. When the stock price falls and breaks through the dense chip area, the box, or the trend line, while also being accompanied by a large volume, it indicates that the bulls are unable to support, and the bears are in the upper hand. This is a selling stop-loss signal.

6. After a long-term decline, when the stock price forms a valley bottom and begins to rise, but the trading volume does not significantly increase, it indicates that the rise is weak, and the stock price will probe the low point again. If the stock price falls during the probe and the trading volume decreases, it indicates that the killing momentum is exhausted, which is a signal to confirm the future reversal and rise. If the volume rises again, this is a buying signal.

7. After a period of continuous volume reduction and decline, if the stock price falls sharply again in a panic, accompanied by an increase in volume, it is the main force taking advantage of the sharp decline to build positions, indicating that the bear market is about to end. It is usually the last fall, and once the price stops falling and rises, it is a buying signal.8. After a surge in stock prices, they then retract with reduced volume, followed by a long period of consolidation at low volume. When the stock prices rise again with increased volume, it is a signal to buy.

The Significance of Trading Volume

In technical analysis, the study of the relationship between volume and price holds an extremely important position. Trading volume is the driving force behind stock price movements; effective market changes must be accompanied by trading volume. Trading volume is an indicator that attracts attention, and the size of the volume reflects the degree of investor interest in a particular stock.

Stock Selection Skills Based on Trading Volume

1. Trading Volume Peaks Higher Than the Last

The pattern formed by the high and low accumulation of stock prices and trading volumes is referred to as a "peak." "Peaks higher than the last" means that the peaks formed by the accumulation of stock prices and trading volumes are higher than the previous ones. If the stock price can also set a new high in the near term at this time, this phenomenon often indicates that the upward space for the stock price has opened up, and there is a prospect for the market to continue rising.

2. Trading Volume Buy Stock Skills - The Explosive Volume Purchase Method

What kind of volume is considered "explosive volume"?

The term "explosive volume" here refers to a stock that has released the largest trading volume in recent times today. This large volume may be the highest in the last 10 days, 20 days, ----, N days. When the stock price stands above the top of the explosive volume candlestick body, a short-term buying opportunity arises.Translate the following passage into English:

1. What are aggressive buying and selling orders?

A. Aggressive buying orders refer to orders that are placed at a price higher than the current market price and are actively executed, which are also included in the external volume. The external volume is the total of all aggressive buying orders. Buying at a price higher than the current market price indicates that the buying orders are quite active, which can easily push up the stock price.

B. Aggressive selling orders refer to orders that are placed at a price lower than the current market price and are actively executed, which are also included in the internal volume. The internal volume is the total of all aggressive selling orders. Selling at a price lower than the current market price indicates that the selling orders are quite active, which can easily push down the stock price.

2. The four relationships between aggressive buying and selling orders and the stock index (white line):

A. When the stock price reaches a new high, and the corresponding aggressive buying orders (red bars) also reach a new high, it indicates that the buying orders are driving the rise, which is a healthy upward trend, and the rise is likely to continue.

B. When the stock price reaches a new high, but the corresponding aggressive buying orders do not reach a new high, there is a divergence between volume and price, indicating that the buying orders do not support the rise, the rise is weak, and it is easy to fall back, avoiding chasing highs.

C. When the stock price reaches a new low, and the corresponding aggressive selling orders (green bars) also reach a new low, it indicates that the selling orders are driving the decline, which is a normal downward trend, and the decline is likely to continue.

D. When the stock price reaches a new low, but the corresponding aggressive selling orders do not reach a new low, there is a divergence between volume and price, indicating that there are not many people willing to sell at this time, the downward momentum slows down, and it is easy to stop falling or turn around, avoiding selling at a low price.

Generally speaking, a simultaneous increase in volume and price is a healthy rise, and the rise requires the driving force of aggressive buying orders. Once there is a divergence between volume and price, the stock price is prone to turning points. At the same time, the divergence between volume and price further verifies the divergence of the index, and the combination of the two is the beginning of the turning point.Volume Interpretation

1. Volume contraction with price increase. During the consolidation period after a prolonged decline in stock prices, the occurrence of volume contraction with price increase is a signal that the stock price is about to reach its bottom. If this phenomenon appears at the beginning of an uptrend, it can be seen as the stock being controlled by the main force of capital, and the future market is bullish. If this phenomenon appears during a rebound in a downtrend and at the later stage of an upward trend, it indicates that the driving force of the stock price increase is insufficient, and investors need to be cautious about avoiding risks at this time.

2. Volume contraction with price decrease. This is a common phenomenon of the relationship between volume and price in a downtrend and an adjustment trend in an upward market, indicating that the stock price will still be in a downtrend or adjustment. As the stock price falls, the market's wait-and-see sentiment becomes more and more serious, resulting in the phenomenon of volume contraction with price decrease. When this phenomenon occurs, investors need to wait and see, and should not participate in long positions.

3. Volume increase with price increase. Volume increase with price increase refers to the phenomenon of the volume and price rising together, indicating that the stock price has entered a stable upward trend, with the market being active, and investors can start to take long positions. If there is a sudden large increase in volume and a sharp rise in stock prices, attention should be paid to short-term risks, especially when the trend is downward and the stock price is at a high level.

4. Volume increase with flat price. This phenomenon can occur at every stage of market operation, and it has different meanings at different stages. When it appears at the bottom, it indicates that the main force of capital has begun to intervene; when it appears at the beginning of an uptrend, it indicates that there is still room for the stock price to rise; when it appears at the later stage of an uptrend, it is considered that the internal driving force of the stock price increase is insufficient, and the market is about to reach its peak; when it appears at the top, it is a signal of the main force of capital withdrawing.

5. Volume increase with price decrease. It usually appears at the beginning of a stock price decline and is a top signal. If it appears at the later stage of building a bottom or at the beginning of an uptrend, it can be interpreted as a bear trap set by the main force of capital. When a bear trap appears at this time, it indicates that the main force is deliberately suppressing the stock price to obtain more cheap chips, or to clean up the floating chips.

6. Sky-high volume and price. Sky-high volume and price refer to when the stock price rises to a certain height, the volume has reached the largest volume of the stage, and is far greater than the volume of other periods, indicating that the stock price is about to reach its peak or is about to reach its peak. Sky-high volume and price is a top reversal signal, reminding investors to sell their chips as soon as possible.

7. Bottom volume and price. Bottom volume and price refer to after a period of decline in stock prices, the volume has shrunk significantly, reaching the lowest volume of a certain historical period. Bottom volume and price indicate that the market transaction is extremely light, and the transaction is very scarce, indicating that the stock price is about to reach its bottom.The simplest way to understand the changes in volume and price is the saying "with volume comes price, without volume there is no price." Therefore, after a high volume, a high price usually appears within three days. If it does not, it is a sign of a market reversal, indicating the formation of a top. Conversely, a new low volume within three days will definitely lead to a new low price, and if it does not, it indicates that the bottom is complete.

The specific 9 volume formulas are as follows:

1. Add positions when the price rises with stable volume: When the stock price is going up and the trading volume is not yet high, it is the time to add positions.

2. Exit when the price falls with stable volume: When the stock price is falling and the trading volume is not active, it is often prone to a slow decline, and it is best to exit.

3. A decrease in volume with a falling price will continue to fall, and an increase in volume with a rising price will continue to rise: A decrease in volume with a falling price indicates that the bears have not yet fully vented; an increase in volume with a rising price often indicates that the main force has a high degree of control over the market, cherishing the funds and selling cautiously.

4. A significant increase in volume with a falling price will lead to a rebound, and a significant increase in volume with a rising price should be wary of a drop: A significant increase in volume with a falling price is often the final blow, while a significant increase in volume with a rising price is the main force's last delivery.

5. If the bottom does not fall with an increase in volume, the bottom has appeared, and if the top does not rise with an increase in volume, the top has appeared. When the price at a low position does not fall with an increase in volume, it is important to pay attention to the opportunity to get on the bus. After rising, if the volume increases and the price does not move, it is often the top building.

6. If the top falls without volume, the market will rise significantly in the future: When there is no volume, the stage is topped, and after falling again, it indicates that the main force has thoroughly washed the market, and the probability of the market rising again in the future is high.

7. If the top falls with an increase in volume, the market will adjust for a long time: After the top increases in volume and falls, do not rush to get on the bus, indicating that the main force has already delivered the goods, and there is no large capital to take over.8. Subsequent volume exceeds previous volume, the stock market will follow: At the beginning of the upward movement of stock prices, if the trading volume of one wave is higher than the previous one, it is a sign of the continuation of the trend.

9. Small volume forms the bottom, large volume forms the top: This refers to the situation where after the stock price lingers at the bottom, the volume will shrink, and then it can build a bottom and reverse; while at the top, the stay time is usually not long, and the trading volume is often enlarged.

Conclusion

Is the truth a deep understanding in the heart, or just a feeling of understanding? Is it through personal practice to obtain the truth, or just by hearing the truth. On the surface, understanding is just the extent to which I have heard this sentence, without deep thinking through the brain, stingily not using thinking to judge. Then such a truth is indeed useless to you, and it will eventually verify "not living a good life."

Trading is not just about understanding the truth to make a profit, but it starts with planning, success starts with planning, and having no plan is planning to fail.

In trading, if you cannot adhere to consistent operations, in terms of wisdom, it is unknown, so the action can only be an idea, and the execution is just an illusion; from the essence of analysis, it is because you do not understand the rules of your operations, do not understand the probability of stop loss, overall profitability, so you will lose confidence in the system after a few losses and start to doubt, and then look for another system, next time encountering such a problem, looking for a new system, and so on, human nature is like this. If you can't do consistency in trading, it is still because you don't understand your own profit logic, the robustness of the system, and you don't have enough retraction, and you are not confident enough. If the system encounters unsuitable market conditions and may cause losses, the estimate is not enough, and at the same time, it cannot be tolerated.

You need to understand your trading logic, what kind of money can you make? When should you not try, what is the reason for losing money? For me, it is to make a small cycle breakthrough against the trend. Test the system's profit probability, when extreme loss situations occur, the maximum loss, etc., think clearly, consider clearly, and naturally, you can achieve consistency.

Trading is like life, keep the inner peace, tolerate imperfections, understand the simple persistence, and perhaps you will find happiness. Being driven by human nature to chase passion is ultimately in vain.