Price Volume Analysis is a popular strategy used in technical analysis which allows investors to make more informed decisions about buying and selling stocks. This strategy analyses the relationship between a stock’s trading volume and its price.
Trading volume refers to the number of shares traded in a given time period, while the price refers to the cost per share. When they come together in an analysis, it can help gauge market sentiment and could potentially predict future market trends.
For instance, an increase in trading volume combined with a rise in stock price is often seen as a positive indicator reflecting strong investor interest. It implies that the asset has real, robust demand, and it would suggest a continuing upward trend in price. On the other hand, a rise in volume accompanied by a drop in price could indicate a bearish (downwards) trend.
However, investors should not rely solely on Price Volume Analysis when making investment decisions. It should be used in combination with other technical indicators to increase the accuracy of predictions, as this analysis does not consider a number of other crucial market influences.
