Volume Indicators Quotes

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Understand Critical Volume
by Using Multiple Charts

A lot of our professional customers generally have more than one chart opened for different periods and indicators simultaneously. Having more than one chart and indicator open at one time can help you see patterns in the market with greater clarity.

You can open new Java Chart by doing any of the following:

• Clicking on 'New Chart' in the 'Indicator' menu of the Java Charts
• Pressing 'Ctrl+N' from within the Java Charts
• Clicking on an index or exchange link in the members Market Summary

This way you can open the same indicator several times and set different periods and volume moving averages for each chart.

You may ask why you should do this. When you have several different charts open you will get a better picture of what's happening on the market. Sometimes by simply looking at a 1-day chart you can lose the picture of the market, as what happened yesterday or the day before can greatly affect what's going on today. That's why it's very important to have a look at several different periods, especially the 5-day and 15-day periods if you are looking to place short and mid-term trades. By looking at 15-day-and-up periods, you can see the general market trend and major support and resistance levels of the market. By combining all this information you can create a successful trading strategy.

For example, below we have a 5-days chart of the NASDAQ 100. You can see the rise in activity for the market during the period of January 22-23, 2002:

From this chart you can see that the direction of the index changed during an increase in the volume moving average (VMA) Some people may ask whether the index will continue this uptrend, or will it die off and continue going back down. The key to answering this question is to know whether the volume associated with the index's move upwards was large enough to make this move permanent. We call this critical volume.

If you were to take a look at the 6-month chart for the same indicator (NASDAQ 100) you will see that the volume associated with the above change in direction was not critical. The volume surge above did not approach the level of the volume that caused the index to be in a downward trend to begin with on December 6^th. Therefore this volume was NOT critical, and the index should continue its downward trend.

Now, according to what we have said above, what do you think about the peak of volume that occurred on February 14^th, 2002, from 13:00 to 16:00? Is it a critical volume signal that shows the market is going to continue up (as it occurred on a down market), or is it not critical and the market will go down?

We want to help you better understand the importance of volume signals in trading, and we hope that our few starting points will help you to make your own analysis and make successful trading decisions.

Special Note: All 1-day, 5-day, 6-month, and 1-year charts are in real time and automatically refresh, but all other charts do not automatically refresh but are still up to the minute data.

NEXT: Intraday Scalping

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