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[Yamada]
"One of the technical analyst's key tools is the measure of
volume. Volume is the weapon of the bull. Stocks do not need volume
to go down; they can fall of their own weight simply from an absence
of demand. But all markets need incremental volume to go up. Volume
is the empirical evidence of aggressive demand". |
Five
Powerful Volume Patterns, Farley, 2004
Here are five volume patterns that show considerable predictive
power when interpreted correctly. Watch for these setups whenever
you're flipping through your charts. Then realize how volume can
yield vital information long before price action tells the tale. |
Volume,
Volume, Volume, Johnson, 2004
The main reason people are deceived by volume is they don't know
when to consider it. Truth is, volume in most circumstances is absolutely
useless, and ultimately, absolutely crucial. That's right - useless,
but crucial. Think of it this way, on a 2,000-mile drive across
country, how important is it that the car brakes work? The truth
is, you could go without the brakes for 99% of the trip. But being
able to use your brakes for just 1% of the trip will save your life.
Take a rally within a down trending channel. Volume is very light
on the advance, which could lead many bears to believe that the
rally is doomed. I am not so sure that is correct. To me, it is
just like cruising down the road within the down trending channel,
without the need to use the brakes yet. In order to determine the
importance of a rally we need to wait for a while until we get to
the top of the channel. Along the way, within the meat of
the channel, volume tells us very little. Volume can be
huge or scarce in this abyss, it just doesn't matter yet. When approaching
the top of a channel, only then I will pay attention to volume to
see if we can breakthrough on increasing volume, consolidate the
gains on low volume, then breakout within a week on moderate to
high volume. |
Market
Statistics and Technical Analysis: The Role of Volume, Blume,
Easley and O'Hara, 1994
"This research has documented a remarkably strong relation
between volume and the absolute value of prices changes in both
equity markets and futures markets. Volume is convex in
price with its minimum at price equal to the
prior expected value of the asset. As is apparent, large
price changes (either positive or negative) tend to be associated
with large volume. Volume is related to dispersion of
beliefs. Trade occurs as individuals have differing signals.
Trade does not disappear because although traders' beliefs are
converging to a common belief their precisions are diverging at
the same time. Intuitively, these effects can be explained by
noting that in early periods traders may receive information indicating
a wide discrepancy of price from true value, but because they
are not very sure of the true value (i.e. their precision is low),
they take limited positions. In later periods, when prices are
close to true values, traders are more confident (precisions are
high) and hence take a large positions to exploit even small price
discrepancies. Our results on the distribution of volume dictate
that these two effects essentially offset. Volume can be used
by traders to indicate the quality of information signals coming
in. This quality is changing over time in the model. For very
uninformative signals volume is low since traders place very little
confidence in these signals. As the precision of the signal increases,
trading volume increases at first. However, when the informativeness
of the signal gets very large trading volume starts to fall due
to the fact that people are actually receiving very precise and
highly correlated signals. This model also shows how the value
of technical analysis depends critically on how informative new
signals are for traders relative to prior information".
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Persistence
of the Dow Jones Index on Rising Volume, LeBaron, 1992
"This paper has demonstrated that there is evidence for increased
persistence in the Dow Jones Index on rising volume. Persistence
is directly related to the current rate of change of volume. Large
volume may be associated with more negative or positive autocorrelations
depending on whether there is informational asymmetry. Without informational
asymmetry large volume indicates a large amount of buying or selling
for liquidity reasons and the price should rebound quickly to its
previous levels. In the presence of informational asymmetries large
volume may be connected with persistence in price movements since
the price does not fully reflect the private information of informed
traders". |
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The
Empirical Relationship Between Trading Volume, Returns and Volatility,
Brailsford, 1994
"There is substantial interest in how trading volume is related
to price movements in the stock market. A naive view of the market
is that the greater the level of volume, the greater the price movement.
However, instances can be found where a low level of volume is associated
with large price movements and conversely, a high level of volume
is associated with no change in price". |
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Psychological
Factors, Stock Price Paths, and Trading Volume, Huddart, Lang
and Yetman, 2002
"We examine the relation between the trading volume of a stock,
expressed as a percentage of shares outstanding, and aspects of
the stock's past price path. We find that volume is significantly
higher (in both economic and statistical terms) in weeks when the
current price exceeds the highest price attained in the prior year.
The evidence is consistent with this highest prior price serving
as a reference point used by investors in making trading decisions". |
Most
Recent Nasdaq Rally Fueled by Triple Q Action - Is Something Fishy?,
Goldberg, 2004
"The trading in the Nasdaq 100 (QQQ-shares) has been disproportionately
high compared to the volume of the entire Nasdaq over the last few
weeks. Am I suggesting a "conspiracy theory", or is the
trading action on the QQQ's just an aberration? Does the market
suddenly favor index funds more so than it did just a few weeks
ago, or are the Q's merely a trading vehicle for organized market
manipulation? Can markets be manipulated over the short, intermediate,
or even long term? Are they being manipulated now?" |
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