Do you check the volume of a stock before you pull the trigger? If the answer is no, then you should. Volume can show the direction of a trend in the same manner as price action (the day-to-day price changes of a security). As you probably know already, volume can be found at the bottom of a stock's chart. With that said, just because it is located at the bottom doesn't mean you shouldn't pay attention to it. Volume Is Like Gas Volume can tell a lot about the future momentum of a stock. Think of it like gas. In order for a car to drive a long distance, it needs a full tank. In terms of the stock market, this means that in order for an upward or downward trend to continue, the volume must be present. Without gas, or volume, neither the car nor the stock will go anywhere. While it's true that a stock can trade up or down without heavy volume, trends are confirmed or denied based on the action of the volume. Let's compare two stocks, ABC and XYZ. Stock ABC has gained 5% in three sessions, but traded half as many shares as normal each day. On the other hand, stock XYZ gained 3% over the same three sessions, but each day traded three times its average volume. Which will most likely be higher a week from now, all else being equal? Most likely stock XYZ. This is because there is a negative divergence -- a contradiction between two indicators -- between stock ABC's price movement and volume. To confirm or deny a trend, you want a stock's price movement and volume to move in tandem.
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