Course: Chart formations
Lesson Insights
Trading volume can play a crucial role in technical analysis and interpreting chart formations. The amount of trading volume can indicate the level of investor interest in a particular security and can help to confirm or refute price movements. A high volume during a price increase can indicate a strong bullish sentiment, while a high volume during a price decrease can indicate a strong bearish sentiment. Additionally, the volume data can help to determine the strength of a trend and whether a trend is likely to continue or reverse. By considering volume data along with price movements, traders can get a more complete picture of market sentiment and make more informed investment decisions.
Trading volume has an important role in examining formations, since it helps to identify breakout points and to calculate the target price.
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