Don’t forget to consider volumes in share investment
Data analysis, candlestick patterns, chart patterns & indicators are the basic ingredients in technical analysis which are have to be followed up before determining your own set of share investments. Volumes are another key ingredient which can falsify your predictions with regard to a particular stock.Volumes are nothing but it is the number of contracts or shares traded over a period of time. Volumes determine the activity of the securities. The higher the volumes, higher are the activity in the security and greater is the momentum in it. Volumes play a major role in determining the formation of the patterns and confirming their breakout. Suppose if a ?Head and Shoulders Pattern’ formation has taken place and an upside breakout is coupled with heavy volumes, then that breakout shall be regarded fiat currency as the true & genuine one, otherwise, the breakout is false. The next trading session shall witness the resumption of the original range below the neckline. Hence, if the volume is weak, then even the best of chart patterns, indicators and moving averages can give you the fake signals.Weak volumes mean weak participation by the traders. If the stock has been in an uptrend with subsequent rise in the volumes, but after some trading sessions, the volumes starts diminishing but the prices are still high, it means that traders are wary of the stock and the trend reversal is going to take place. Here, the share investment (in this particular security) is not feasible in the short run. Money Flow index will show you the clear picture of it because after a consequent rise it may either start running flat.