Volume is one of the most important indicators traders use to 'predict future price direction. The ability to read volume signals will be one of the handiest tools in your toolbox.

Have you ever gone to a party where few people showed up? Not very exciting, was it? In the same way, when you're buying a stock, you don't want to be the only person at the party! You want lots of people to attend so that the stock skyrockets right out of the gate (breakout).

Think of high volume as energy being directed at a stock. This energy may be positive or negative.

Can you hear your dentist telling you, „Only floss the teeth you want to keep?“ Makes sense. Keeping your teeth extra-clean means they'll stay healthier, longer. When you water and fertilize a plant, it flourishes happily. If you don't, it withers. During the weeks that you deposit money into your checking account, you have the funds to pay your bills. No deposit, no bill paying. Conclusion: Positive energy directed at an entity-huan or otherwise-causes it to flourish. Low or negative energy causes it to stagnate and atrophy.

Stocks, especially, respond to energy. Human energy translates into volume, or the number of shares traded in a specified period of time. By now you've spotted the volume spikes that run along the bottom of the charts we've observed. The spike below the candlestick represents the total number of shares traded during that session.

Stocks move in three directions-up, down, and sideways. The sideways moves can be divided into three basic categories: trading in a range, congestion, and consolidation.

When we say a stock is „trading in a range,“ that means it is bouncing up and down between a low price area, or support, and a higher price area, or resistance. It is not trending. Another term for trading in a range is „bracketing.“