Add Volume & Quantity for Analysis
It used to be that price was the most important indicator on a stock chart. Most stock indicators, market breadth indicators, and sector indicators are based solely on price and time due to the importance weighted on price action in the past. Most stock indicators writers of the 20th century focused on writing Price and Time Indicators, to reveal patterns not easily seen in price charts of that era.
Candlestick charts have grown exponentially in popularity and are far easier to read and interpret. However not including the third piece of data of the entire data set that is derived from each trade order transaction, increases risk factors in the automated marketplace.
The reason Volume and Quantity Indicators have become such a critical aspect of chart analysis, is the new order types available exclusively to the giant and large Buy Side Institutions that use Dark Pools aka Alternative Trading System venues for their giant and large lot transactions.
The goal of a giant Buy Side Institution is to buy or sell the stock at a predetermined price range, but no higher and no lower. This is done using a precise entry trigger mechanism that ensures a mid-range National Best Bid Offer execution.
The result is giant and large lots trading out of sight off the exchanges, are able to buy or sell stocks without disturbing price.
These institutions control a massive amount of shares of stock, and account for the bulk of giant and large lot transactions.
By studying Volume Bars and Candlesticks as well as Price and Time Indicators such as MACD and Stochastic, they can improve their success rate rapidly and significantly.
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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