What is Volume?

• Volume refers to the total numbers of shares or • Volume Spikes

contracts exchanged between buyers and sellers of a - Volume should confirm the trend
security during trading hours on a given day. o A volume spike is a sudden and
• Volume is measured on stocks, bonds, options sharp rise or fall in the number of
contracts, future contracts, and all types of shares traded in a given period. It
commodities. usually indicates a strong interest
• Volume is a measure of the market’s activity and or emotion from buyers or sellers,
liquidity during a set period of time. and often precedes a major price
move. A volume spike can be
Why is volume important? bullish or bearish, depending on
• Volume serves as a warning as to whether a stock is whether it occurs during an
on the verge of breaking into upside territory (high uptrend or a downtrend.
volume) or into a downside trend (low volume). Volume Indicator
• Volume can help investors decide whether it's the • On-Balance Volume
right time to buy or sell shares • Volume Moving Average
• Chaikin Money Flow
Key Concepts in Volume Analysis
• Volume as confirmation tool On-Balance Volume (OBV)
- a technical analysis tool that helps traders • On-Balance Volume (OBV) is a technical analysis
and investors to improve their decision- indicator that measures buying and selling pressure
making capabilities. as a cumulative indicator.
- When analyzing the volume of a security, • It was developed by Joe Granville and is used to
traders should look for confirmation of the predict price movements based on volume changes.
trend. In an uptrend, for instance, volume Formula:
should be increasing as the price rises, and If today's closing price is higher than yesterday's closing price:
decreasing as the price falls. If the volume is • [OBV_{today} = OBV_{yesterday} +
not confirming the trend, it may indicate a Volume_{today}]
reversal or false breakout. If today's closing price is lower than yesterday's closing price:
- Benefits of using volume confirmation • [OBV_{today} = OBV_{yesterday} - Volume_{today}]
1. Improves accuracy If today's closing price is equal in yesterday's closing
2. Identifies trend reversals price:
3. Provides additional insight • [ OBV_{Today} = OBV_{YESTERDAY}
4. Enhances Risk Management
On-Balance Volume (OBV)
• Divergence between Price and Volume
- When the price of a security is moving in
one direction and the volume is moving in
the opposite direction, it may indicate a
divergence and a potential reversal.
- An increase in price accompanied by a
decreasing or flat volume trend is a
divergence and may suggest that the
downward price movement is weak and
won’t hold
- A decrease in price accompanied by an
increasing or flat volume trend is a
divergence and may suggest that the
upward price movement is weak and won’t
hold.
What is Volume Moving Average?
• The Volume Moving Average (VMA) is a technical
indicator used by traders to analyze the volume of an MOVING AVERAGES
asset over a specific period. Unlike traditional
moving averages that focus solely on price, the VMA • A moving average is a stock indicator that is
incorporates trading volume, providing insights into frequently used in technical analysis to help smooth
market trends and the strength of price movements. out price data by producing a continuously updated
average price. By generating a continuously updated
Chaikin Money Flow (CMF) average price, the moving average of a stock is
calculated to assist smooth out the price data.
• An indicator used in technical analysis that quantifies
the dispersion and accumulation of an asset or stock SIMPLE MOVING AVERAGE (SMA)
over a given time frame
• A simple moving average (SMA) is a calculation that
takes the arithmetic mean of a given set of prices
over a specific number of days in the past.
• How to use CMF
An effective technical tool for traders to evaluate EXPONENTIAL MOVING AVERAGE (EMA)
buying and selling pressure in a market is the Chaikin
Money Flow (CMF). This indicator is based on the • An exponential moving average (EMA) is a weighted
Chaikin Oscillator, which measures the strength of a average that gives greater importance to the price of
price trend by using volume. a stock in more recent days, making it an indicator
that is more responsive to new information.
TECHNICAL INDICATORS
RELATIVE STRENGTH INDEX (RSI)
• mathematical formulas or algorithms that analyze
past price data to identify potential future price • The relative strength index (RSI) measures the speed
movements in the financial markets. They are used and magnitude of a security's recent price changes
to help traders and investors make informed to detect overvalued or undervalued conditions in
decisions based on historical data. the price of that security.
• How to use RSI
TYPES OF INDICATORS o RSI is a momentum indicator that ranges
from 0 to 100.
• TREND INDICATORS o A trend reversal may be confirmed by the
o These indicators help identify the direction RSI.
of a market's trend. o The RSI provides technical traders with
o When prices are above the average, this signals about bullish and bearish price
indicates a bullish trend, with the reverse of momentum, and is often plotted below the
prices below the average, suggesting a graph of an asset’s price.
bearish trend.
o Examples include moving averages and • OVERBOUGHT CONDITIONS
MACD o Overbought (above 70) stock has increased
rapidly in a short period of time and may
• MOMENTUM INDICATORS reverse lower
o These technical indicators are used to o When the RSI crosses back below 70 = exit
identify the speed of price movement by signal (SELL)
comparing the current closing price to
previous closes. • OVERSOLD CONDITIONS
o Oversold (below 30) stock that has
• VOLATILITY INDICATORS decreased rapidly in a short period of time
o These technical indicators measure the rate and may reverse higher
of price movement, regardless of direction. o When the RSI crosses back above 30 =
o Examples include Bollinger Bands bullish entry signal (BUY)
• VOLUME INDICATORS
o These technical indicators measure the
strength of a trend based on the volume of
shares traded.
MOVING AVERAGE CONVERGENCE AND DIVERGENCE 3 WAYS IN IDENTIFYING MACD INDEX BUY AND SELL
INDICATOR
• MOVING AVERAGE CROSSOVER
• or also called an oscillator is a technical indicator to
help investors identify entry points for buying or
selling. A trend-following indicator that compares
two moving averages.

•
• Inventor: Gerald Appel Developed: Late 1970's
• Invention: a tool indicator that utilize moving
averages
• Purpose: to determine the trend direction,
momentum and potential reversals of an asset
• UNDERSTANDING THE FUNCTION OF MOVING
AVERAGE TO MACD

• MACD HISTOGRAM

• MACD DIVERGENCE

ELEMENTS OF MACD

• 3 ELEMENTS TO FAMILARIAZE WHEN USING MACD

INDICATOR

WHAT IS BOLLINGER BANDS

• Technical analysis tool developed by John Bollinger in

1980s
• To help investors identify the market volatility and
when securities are to rise or fall
• Composed of three lines: a simple moving average
(SMA) and two standard deviation bands above and
below the SMA.
BOLLINGER BRANDS move will usually continue to go
UP.
• When the price reaches the upper Bollinger Band, it
signals overbought suggesting a potential price If the candles start to break out below the BOTTOM band,
correction. then the price will usually continue to go DOWN.
• When price touches the lower Bollinger Band it
indicates oversold conditions, hinting at a possible
price rebound.

Where do you think will the price go?

• BOLLINGER BANDS WITH RSI
o If price touches the Upper Band and the
other technical indicator does not confirm
the upward move (i.e. there is divergence),
a sell signal is generated.

•
BOLLINGER BOUNCE

o
• BOLLINGER SQUEEZE
o occurs when band comes close together,
indicating low volatility, also known as the, The reason these bounces occur is that the Bollinger bands
“squeeze.” act like dynamic support and resistance levels. Prices tend to
o The squeeze suggests that when the bands return to the middle of the bands
tighten during a period of low volatility, it
raises the likelihood of a sharp price move
in either direction.
▪ If the candles start to break out
above the TOP band, then the
CONCLUSION RELATIVE STRENGTH INDEX

MOVING AVERAGES RSI Below 30 (Buy Signal):

• Buy Signal is triggered when prices cross above • Indicates an oversold condition.
the moving average. • A buy signal occurs when RSI crosses above 30,
• Sell Signal is triggered when prices cross below signaling potential upward reversal.
the moving average.
• Golden Cross is a sign of strong buy signal RSI Above 70 (Sell Signal):
• Death Cross is a sign of strong sell signal
• Indicates an overbought condition.
SMA • A sell signal occurs when RSI drops below 70,
signaling potential downward reversal.

RSI Divergence:

• Bullish Divergence: Price makes lower low, RSI

makes higher low → Potential upward reversal.
• Bearish Divergence: Price makes higher high,
RSI makes lower high → Potential downward
reversal.

RSI Midline (50):

• Crossing above 50: Momentum shifts to buyers,

confirming a buy.
• Crossing below 50: Momentum shifts to sellers,
confirming a sell.

Example:

MOVING AVERAGE CONVERGENCE DIVERGENCE

Buy Signal:
• MACD Crosses Above Signal Line: Indicates bullish
momentum; potential buying opportunity.
Sell Signal:
• MACD Crosses Below Signal Line: Indicates bearish
momentum; potential selling opportunity
Additional Signals:
• Zero Line Cross:
o MACD above zero → bullish signal.
o MACD below zero → bearish signal.
 • Divergence
o Price moves opposite to MACD → possible trend
reversal.

BOLLINGER BANDS
Buy Signals
1. Touching Lower Band: Indicates potential oversold
conditions.
2. Bollinger Squeeze: A breakout above the upper band
after a squeeze may signal a buying opportunity.
3. Bullish Reversal Patterns: Look for patterns near the
lower band.

Sell Signals:
1. Touching Upper Band: Indicates potential
overbought conditions.
2. Bollinger Squeeze: A breakout below the lower band
after a squeeze may signal a selling opportunity.
3. Bearish Reversal Patterns: Look for patterns near the
upper band.

COMBINING TECHNICAL INDICATORS

• Combining technical indicators in trading
strengthens signals, reduces false positives, and
provides more reliable insights. By using
multiple indicators, traders can confirm trends,
spot overbought or oversold conditions, and
identify optimal entry and exit points.