The Importance of Volume

An analogy on the importance of volume. 

Picture that you’re standing in a huge field with 10,000 people. The 10,000 people represent the scattered volume throughout every stock in the market. It would obviously be a lot more people, but for the analogy sake, we'll call it 10,000.

Let's also say, that throughout this field there are 20 even sized boulders. The boulders represent stocks at resistance (and their weight being so difficult to push would be the sellers). Each boulder represents 1 stock. 

The people represent the buyers in the market. Their objective is to push the boulder as far as they can, with the distance representing a relative rise in stock price. Once they ring the bell, all the people scatter trying to push whichever boulder they please. You stand back and wait for 15-30 minutes and take in all the action. 

Obviously, the boulder with the most people pushing it will move the furthest, in the swiftest amount of time. It would be prudent for you to follow the highest amount of people, or greatest amount of volume in a stock breaking resistance, in order to gain the most. The best breakouts will always be characterized by the high amount of volume, especially after resistance (once they get the boulder rolling).

Do you have balls?

Your task today is to create your own analogy for trading or learning how to trade and post it in the Chart Reading chat. 


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