Stock Market Billion Dollar Trader Reveals His Favorite Indicator
Ready to learn how to ethically steal TONS of money from other stock market traders with this one indicator?
This is an incredible indicator used by none other than Steve Cohen. Cohen's firm, S.A.C., which derives its name from his initials, is a multi-billion dollar hedge fund company. His actual trading profits have averaged approximately 70 percent per year.
Some 40 traders work under him. He is the king of tracking the volume of any given stock or market.
Volume is one of the most overlooked indicators by amateur traders.
We all have holes in our learning. You need to read this article and make sure you plug the holes you might have in your learning of how to effectively use the volume indicator.
Each measured unit of volume represents the meeting of minds between two individuals: a buyer and a seller. Volume measures shares or contracts that have changed hands. Volume is most commonly shown as a histogram bar below the stock price. Volume reveals clues about the psychology of bulls and bears. Rising volume confirms trends while falling volume means you should question the longevity of the existing trend.
In a sell off, increasing volume into the move tells you that panic has firmly settled in as traders scramble for the exit. If you look carefully, you'll also see newbies jumping in as they bet the market is going to reverse. Keep in mind that in order for a sell order to execute, someone has to be a buyer. Every trade has these two sides. Jumping in to buy in a downtrend is known as trying to catch a falling knife. Most often it is a bad idea. Never bet against the wisdom of the crowd. Let some other newbie put on that trade. When all the sellers have exited the stock, the volume on the downside falls off as the downward move begins to run out of steam.
When a stock is trending higher, watch the volume. If the volume is increasing into the upward trend, it means that greed is causing more and more traders to take notice of a particular stock and to dog pile into that stock. As the stock continues to trend higher, the volume will continue to build which tells you that more and more traders are piling into the stock and that extreme greed has firmly gripped the market participants. Now keep an eye on the volume. Fear will slowly begin to replace greed as the volume begins to fall off and the uptrend starts to run out of steam.
Volume goes beyond just telling the conviction of a current trend, it gives you several clues.
A one-day splash of uncommonly high volume often marks the beginning of a trend when it accompanies a breakout from a trading range. A similar splash tends to mark the end of a trend if it occurs during a well established move. Exceedingly high volume, three or more times above average, identifies market hysteria. That is when nervous bulls finally decide that the uptrend is for real and rush in to buy or nervous bears become convinced that the decline has no bottom and jump in to sell short.
A divergence between volume and price usually means that a stock is at a turning point.
If price rises while volume falls, it is a signal that the uptrend is not attracting very much interest. If price falls to a new low and volume falls at the same time, it is a signal that the downtrend is not attracting very much interest and an upside reversal is likely. Price is more important than volume but a master traders knows how to analyze volume in order to gauge the psychology of market participants. - 23159
This is an incredible indicator used by none other than Steve Cohen. Cohen's firm, S.A.C., which derives its name from his initials, is a multi-billion dollar hedge fund company. His actual trading profits have averaged approximately 70 percent per year.
Some 40 traders work under him. He is the king of tracking the volume of any given stock or market.
Volume is one of the most overlooked indicators by amateur traders.
We all have holes in our learning. You need to read this article and make sure you plug the holes you might have in your learning of how to effectively use the volume indicator.
Each measured unit of volume represents the meeting of minds between two individuals: a buyer and a seller. Volume measures shares or contracts that have changed hands. Volume is most commonly shown as a histogram bar below the stock price. Volume reveals clues about the psychology of bulls and bears. Rising volume confirms trends while falling volume means you should question the longevity of the existing trend.
In a sell off, increasing volume into the move tells you that panic has firmly settled in as traders scramble for the exit. If you look carefully, you'll also see newbies jumping in as they bet the market is going to reverse. Keep in mind that in order for a sell order to execute, someone has to be a buyer. Every trade has these two sides. Jumping in to buy in a downtrend is known as trying to catch a falling knife. Most often it is a bad idea. Never bet against the wisdom of the crowd. Let some other newbie put on that trade. When all the sellers have exited the stock, the volume on the downside falls off as the downward move begins to run out of steam.
When a stock is trending higher, watch the volume. If the volume is increasing into the upward trend, it means that greed is causing more and more traders to take notice of a particular stock and to dog pile into that stock. As the stock continues to trend higher, the volume will continue to build which tells you that more and more traders are piling into the stock and that extreme greed has firmly gripped the market participants. Now keep an eye on the volume. Fear will slowly begin to replace greed as the volume begins to fall off and the uptrend starts to run out of steam.
Volume goes beyond just telling the conviction of a current trend, it gives you several clues.
A one-day splash of uncommonly high volume often marks the beginning of a trend when it accompanies a breakout from a trading range. A similar splash tends to mark the end of a trend if it occurs during a well established move. Exceedingly high volume, three or more times above average, identifies market hysteria. That is when nervous bulls finally decide that the uptrend is for real and rush in to buy or nervous bears become convinced that the decline has no bottom and jump in to sell short.
A divergence between volume and price usually means that a stock is at a turning point.
If price rises while volume falls, it is a signal that the uptrend is not attracting very much interest. If price falls to a new low and volume falls at the same time, it is a signal that the downtrend is not attracting very much interest and an upside reversal is likely. Price is more important than volume but a master traders knows how to analyze volume in order to gauge the psychology of market participants. - 23159
About the Author:
By Shawn Tilman. I hope this article helps you better your trading and make a ton of money. For more FREE master stock trading secrets and advice go to stock market
posted by X - Men @ 11:06 AM
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