Now on day 10 of the 30 days to master part-time swing trading challenge we start a series of six challenges built around one of the most important elements to swing trading mastery: volume.
Why we Use Volume
What is trading volume?
It’s the the number of shares traded for a given stock (or security) in a given day.
Why is this important to us traders?
It lets us know how much buying and selling is associated with out stock or market, but there is more to it than that.
The buying and selling gives us subtle clues about the stock.
Think of these clues as footprints.
You see, as swing traders, we ride momentum that we don’t create.
Those that create the momentum are usually what I think of as the “elephants” or the big guys.
We are talking about hedge funds, big banks, institutions and for some smaller stocks the biggest retail traders.
The elephants try their best to hid their footprints, but they are too big.
Expert trackers can follow their trail using volume as the guide.
5 Keys To Using Volume
I use volume to help me understand market trend and direction, time reversals, and identify topping and bottoming patterns. In essence, volume helps me in:
- Tracking underlying accumulation and distribution of a stock.
- Strength of breakouts
- Timing trend reversals
- Identifying blow off top and bottoms or capitulation events
- Confirming the strength of trend related setups.
Volume Patterns: Big and Little Green and Red
In the video, I want you to pay attention to the discussion of green and red candles. Again, we’ll go into more depth the coming days. For now, start studying how they relate to each other and form patterns.
For the most part, a strong positive “accumulation” phase or confirmation of trend contains “bigger green candles than red candles”. A distribution phase, or selling trend, has “bigger red candles than green candles”. However, that doesn’t mean big green is always good and big red is always bad. during reversals or capitulation events, big red candle are actually a good thing.
Over the course of the next 5 challenges, I will go over each of the 4 keys in depth and the concepts of “green and red” in depth. In today’s video, I give you a primer into the concept of volume and each of these 4 points.
Watch today’s video and then do the exercise.
The Day 10 Exercise
- Watch the video
- Pick 20 different charts to study. SPY, QQQ, IBB, FB, NFLX, AMZN, X, GS, LULU, KSS and 10 of your own choosing.
- Make sure volume is on your chart.
- Study the volume patterns, paying close attention to the size of green and red candles during trend phases and at reversals.
Day 1: Getting Started
Day 2: Analyze the Market
Day 3: How to Use Moving Averages
Day 7: The Reward to Risk Ratio
Day 8: Stochatic Indicator
Day 9: Case Study Webinar Replay
Swing Trade Service
This swing trading service is great for those that work and can’t monitor the computer all day. We have in-depth nightly reports on the gameplan for the day/week and all stock picks that I trade will be alerted and emailed to you.
Link to YouTube Live-Stream on July 26th