Thursday, September 18, 2008

Volume as an Indicator

One way I like to judge the interest in a stock is to look at the daily volume vs. its 50 day moving average. This can work both ways, however, in relation to buying pressure or selling pressure.

If you see several days (at least 2 or 3) of volume above the 50 day MA (Moving Average) and the stock price is rising, you are seeing an equity under-accumulation which is a good thing.

Conversely, if you see the same thing with the price going down, you are seeing an equity under-distribution which is not so good unless you are short (not your height, but another way to trade which I won't go into right now).

Have a good one,


  1. Roger, how does what you mention here relate to technical measures like On Balance Volume or Time Segmented Volume? And isn't 50 day MA a little long when the market's swinging like this?

  2. Telecharts is one of my tools, and OBV and TSV are actually a step above simple 50 day MA on volume. They take volume as an indicator another notch up by incorporating other values that I have never seen the formula for. All thinks equal, the 50 day measure is more of a "smoothing" measure in volatile times, and may need to be shorten in half when really wanting to see the effects of volatility in the market.