What You Need to Know About Trading Volumes
Trading volumes on the stock market represent the monetary value and quantity of buy and sell transactions that occurred on a given day, or alternatively, the number of contracts in lots. In some cases, they are also expressed as the number of shares changing hands and are usually indicated by vertical bars drawn at the bottom of the price chart. In fact, Charles Dow summarized everything about trading volumes on the Istanbul Stock Exchange over a century ago with a single sentence: "Volume should confirm the trend." Accordingly, trading volume levels indicate the support, acceptance, and excitement behind price movements. Therefore, in stock markets, trading volumes are expected to increase as prices rise, and decrease in sideways markets as prices fall.
What are the Rules of Trading Volumes?
Stocks appear in markets in quite different ways. Accordingly, as long as the situations are like this, trading volumes confirm the trend. However, when the main trend is upwards, a decrease in trading volumes during downward price movements poses a danger for upward movement. The reasons for this are that the increasing trading volumes indicate that these main trends are ending. The best ways to identify situations where trading volumes do not confirm price movements on the Istanbul Stock Exchange are by looking at the divergence between price and trading volumes. When prices are rising, trading volumes not accompanying these rises or decreasing indicate that price increases will not continue for long. There are some rules universally accepted by technical analysts. These rules stipulate that trading volumes must increase for price movements to start and continue in a certain direction. However, it is important to be aware that these generalizations have a weakness and contain some deficiencies. The first of these deficiencies manifests itself in stock markets, as in futures markets, and appears on limit up/limit down days in stock markets and limit days in futures markets.
