MASTER-CLASS on Volume Exit.
When should you exit a trade?
Determine Exits using Volume.
We will try to explore how.
A thread.
Understanding the nature of Volume and Price Movement.
1. Price increase with Volume Increase is bullish.
2. Price increase with volume decrease is NOT bullish.
3. Price decrease with volume increase is bearish.
4. Price decrease with volume decrease is NOT bearish.
Note- Please read the comments above carefully and have a look at the cheat-sheet.
Warning- Be careful with the 2nd and 4th statement.
Not bullish doesn't mean bearish and Not Bearish doesn't mean bullish.
Hence if such a volume divergence occurs, LOOK FOR EXIT.
Volume Below Average is = Caution.
If there is price expansion with volume below the Average Volume
OR
If there is price contraction with volume below the average Volume
This should be taken as a sign of caution. The price movement is happening with LOW MARKET PARTICIPATION.
If the movement after entry occurs with volume below the average volume, LOOK FOR EXIT.
Price action follows the direction of bigger market participation.
Volume below average = Only retail entry.
Higher volume= Bigger player entering the market.
Volume Divergence.
I have explained Volume divergence in the examples below which is self-explanatory.
If such an event occurs, look for further signs of reversal for an Exit.
Trade Examples.
1. Support Region Tested Several times.
2. Price decreases with Increasing volume.
3. Entry made on new Support break.
Trivia- The more a support is tested, the weaker it gets.
The same principle can be applied to all the scenario described in the cheat-sheet.
Candle Body and Volume Anomaly.
This theory was first described by David H. Weis.
Look for an exit if there is
-Uptrend
-Increasing Volume
-Low body spread & Long upper wick
- Sudden volume jump.
This is an anomaly in PA and should be looking for reversal.
Read the chart.
Retracement VS Reversal.
Sometimes people judge a normal Retracement as reversal.
I don't suggest shorting a retracement.
The short below explains retracement.
Position should be ADDED on retracement.
PLEASE read the chart carefully.
I have explained how to use Volume to judge exiting a trade.
You can summarise the above and try them on Live charts via Paper trading. Make 100 such entries to master volume.
I hope this was useful. Please share it if you found it useful.
All the best.
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