As a trader of technical analysis, we cannot ignore one of the two most fundamental tools that are also the most important, which is price and trading volume (volume). Price is said a lot through price action analysis. We are also familiar with price analysis with candlestick positions, price patterns, resistance/support/trendlines, ... But it is flawed to forget that there is a very necessary tool capable of the strength indicator of the bulls and sellers is exactly as much as the prices.

HOW TO USE VOLUME?

We will have the 3 most basic ways to use volume properly:

REVERSE

A question arises when the price hits resistance (support/resistance) how to know if it will reverse or breakout further. The answer lies in the volume. Of course, you have your own bottom-fishing or breakout system, even better than the volume, but with more volume, your probability of success is higher anyway. But for those who still do not have the tools to support, the volume is a good candidate.

You pay attention. When the price is close to or touching the resistance / support and the volume tends to decrease, it is a signal that the price is weak, the price is likely to reverse because it is out of force, the probability of breakout is very low.

By incorporating price movement analysis, you will be further confirmed as to which side is controlling the market and where to buy/sell.

For example:


With this case, clearly, the price is falling and has hit support, the volume below is tending to go down. There is another story behind it, but to make it easy to understand, we can see that the sellers have weakened, the probability of further decline is very low.

Combined with candlestick analysis, the price moved sideways, creating a tail at the bottom showing that the sellers were weak, now we expect a strong bullish candle to confirm the control of the bulls. The result was a point for a good entry.

BREAKOUT

Breakout is the opposite of reversal, if the case on the volume falls then the case of the price is likely to Breakout, the volume will increase sharply. The simple reason is that the supply and demand forces at the resistance will be absorbed by that volume, if there is still a force that pushes the price forward, the price will definitely breakout.


As shown in the image above, the price is trending up and is hitting resistance. At resistance, price stops to test supply. In the area where the price is testing, the volume is higher than the previous candles. The supply force was completely absorbed by a large amount of volume. Therefore, only demand continued to push prices up. We still hesitate without BUY.

Remember the basic principle: strong volume will help push prices forward. As for the story is complex, how to change.

So we have one more tool to distinguish fake breakouts, real breakouts. Of course, don't be too blind to trust a tool.

PULLBACK

When the price has broken out but returned to the pullback, whether it is a real pullback or a reversal. The answer is still in the volume.


In the image above, the price has broken out and returned to the pullback, you notice, the volume pullback is not as high as when it broke. That is that pullback area, people are not very eager, the mind is BUY and BUY, maybe the transactions in that place are due to people waiting to buy limit or some trader sell at the top and now. take profit in an uptrend ...

In this case, just a nice bullish candle with high volume, we have enough evidence to enter a BUY order.