Looking solely at price trends can easily lead to traps.
Trading volume, representing real money, can help you discern the intentions of major players.
Eight Key Volume Patterns: Uncovering the Footprints of Major Players
Trading volume reflects the market's trading activity and the degree of capital involvement.
• **Extremely High Volume (Distribution Signal/High-Level Risk)** Trading volume reaches an extremely high level for the current phase. If extremely high volume occurs at a high level while prices stagnate, it often indicates major players are distributing their holdings, requiring a prompt exit.
• **Extremely Low Volume (Sluggish Signal/Phase-Level Bottom)** Trading volume shrinks to its limit, with extremely low turnover. Extremely low volume after a prolonged price decline indicates exhausted selling pressure and is a potential bottom signal.
• **Double Volume (Breakthrough Signal/Change of Status)** Trading volume more than doubles that of the previous trading day. Double volume at a low level often signals capital inflow and may initiate a rally.
• **Expanding Volume (Attack Signal/Increased Bullish Strength)** Trading volume increases for several consecutive days, showing a stepped upward trend. This indicates a continuous influx of buyers, and the upward trend is likely to continue.
• Contracting Volume (Warning Signal/Increased Bearish Force): Trading volume decreases for several consecutive days. Decreasing volume at high levels indicates exhausted buying pressure and insufficient momentum, potentially leading to a pullback.
• Half Volume (Washout Signal/Major Player Withdrawal): Trading volume is approximately half of the previous trading day's. Half volume after an uptrend usually indicates a short-term consolidation. If it occurs during a downtrend, it may indicate weakening selling pressure.
• Accumulated Volume (Washout Signal/Strong Breakout Opportunity): Trading volume increases continuously over a period of time, forming a dense volume spike. Accumulated volume at low levels usually indicates major players accumulating shares.
• Concave Volume (Bullish Strengthening Signal/Weakening Bearish Force): Trading volume forms a concave shape, "low in the middle, high on both sides." Concave volume during sideways movement indicates that selling pressure has been released. Buying pressure gradually returns, which can be seen as a buying opportunity.