I wrote about trading volume and how to use it in trading before. Here, we will extend to the application of volume as an indicator in trading. Let’s see how we apply volume as a technical indicator.

Volume plays an important role as an indicator traders use to indicate price direction. Interpretation of volume signals will be one of the handiest tools in your trading toolbox.

Volume is like a form of energy, securities respond to energy. Traders’ energies translate into volume which is the number of shares traded in a specific period of time.

Typically, you can spot representation of trading volume and spikes that run along the bottom of charts we are observing. If you are looking at a daily candlestick chart, a spike below represents the total number of shares trading during that day.

As I mentioned in the beginning, volume is an important indicator, the following are general approaches to read trading signals from the volume.

First, look for high volume on price breakout. When price break its resistance and go up (or break its support and go down). As the price continues their direction, you expect for strong volume. When the price tops off and pullback, you have to make sure that the pullback volume is relatively low. If the pullback volume is strong, it is better to take profit.

Second, scan charts to find the securities that are building their bases by locating the security that increasing in volume while its price continues to trade in the same tight and price range as before. This pattern indicates a high possibility to that institutional investors are quietly accumulating. You have options to wait for the price breaks out or enter a trade while securities are still in the base. If you choose the second, you have to set your stop loss extremely tight to minimize risk.

The third is to use volume and chart pattern together. For example, after 2-3 days up, if today’s price makes a new recent high but the candlesticks form as a doji, star, or other reversal patterns. It’s good time to take profits.

Finally, if climatic volume designated by a huge volume spikes near the end of extended trend, it often indicates that the trend might soon slow or end. Conversely, just because a climatic volume signals a trend reversal, do not take this as a signal to start bottom fishing. The patterns sometimes take a few days or occasionally, misfire.

- About the Author: Taro is an experience trader who trades in stocks, futures, forex. He strongly focuses on technical analysis, trading systems and money management. If you would like to find more articles on MetaStock Tutorials, MetaStock Formulas, Trading Systems and Money Management. Please go to MetaStock Trading System. You would also find the recommended trading books, DVDs, software and tools at MetaStock Trading Store. Article Source

Last week was exciting as investments rocketed higher or tank… We saw Gold and the US Dollar pop while oil and equities dropped sharply with heavy volume.

Just to recap, Wednesday the market went into free-fall mode sending traders and investors running for the door. This was obvious from looking at the large percent drop coupled with heavy selling. That day the NYSE showed panic selling with 37 shares sold for every 1 share purchased meaning pure panic. In my Wednesday night report “How to Take Advantage of Panic Selling for SP500 and Gold ” I explained how to read these extreme market conditions and what to expect the following sessions.

Currently the price of gold, oil, spx are trading somewhat at the opposite extremes seen last week. Below are a few charts explaining the situations:

GLD – Gold ETF Trading Signals

This 60 minute chart shows gold getting hit hard on Wednesday morning. Investors and traders around the globe were closing out positions and moving to cash. This high volume dumping of positions pulled virtually all investments lower and was the first tip-off that the market was in panic mode.

One the dust settled and investor’s regrouped we saw money surge back into gold creating a nice pop the following day. Problem I see is that gold is now trading at a key resistance level when reviewing the daily chart. And if you take a look at the 60 minute chart below you can see the price of gold sold down in the morning on August 13th and drifted up into the close on Friday forming a bearish wedge. Also there was some very strong selling just before the market closed which is also a concern.

USO – Oil Traded Fund

Both times oil has fallen we have seen the price pierce key support levels where the bulls would have the majority of their stops placed. The intraday pierce causes the stops to be triggered washing the market of long positions while the smart money loads up accumulating everyone’s sell orders . This is something which happens with virtually every type of investment and the main reason traders get shaken out just before the market goes in their direction. Anyways, running of the stops is something I will cover in a future report.

Looking at the chart below you can see oil trading at trendline support. Each time the key support levels (blue arrows) have been pierced the market has rocketed higher. Just from looking at the chart from August 9th forward you can see that this move down is overextended and visually looks ready for a pause or bounce in the coming days.

*Trading Tidbit - When trading trendlines it is important to try and play the third test. Reason being is that the first two pullbacks create the trendline and the third test is when active traders generally jump on board causing a sizable bounce. Each test of a trendline it becomes weaker and the probability of a breakdown is more likely.*

SPY – SP500 ETF Trading Fund

The SP500 chart shows last week’s breakdown on the 5th test of the trendline. The market is oversold here and ready for a bounce which I hope we get this week. My concern is that the downward momentum is to strong and a bounce will be negated.

US Dollar Index

US dollar put in a huge bounce last week after testing is 61.8% Fib retracement level from the 2009 December low. The strong bounce has pushed the dollar up to a key resistance level which happens to be 38.2% Fib retracement level from both the December up trend and the recent sell off. I figure this will hold the dollar down for a few days easing the pressure on oil and equities.

Weekend Gold, Oil, SPX and Dollar Trading Conclusion:

In short, I feel there will be a relief bounce in oil and equities while the dollar and gold will have some profit taking and trade sideways or down at the beginning of the week. After that it looks as though stocks and oil will head lower while the dollar and gold rally.

If you would like to receive my Trading Analysis and Signals Complete with Entry, Targets and Protective Stops please visit my website at: www.TheGoldAndOilGuy.com

Chris Vermeulen

- About the Author: Chris Vermeulen is Founder of the popular trading site http://www.thegoldandoilguy.com. There he shares his highly successful, low-risk trading method. Since 2001 Chris has been a leader in teaching others to skillfully trade in gold, oil, and silver in both bull and bear markets. Subscribers to his service depend on Chris’ uniquely consistent investment opportunities that carry exceptionally low risk and high return. Reach Chris at: Chris[at]theGoildAndOilGuy[dot]com Article Source

What to look in a Stock for Intraday Trading ?

1. High volume , high liquidity.

2. Hot & Happening sector.

3. Trending market.

4. Make sure that at whatever price you are entering in a stock, the move is not over already. I mean the stock has steam in it.

Keeping all these things in mind look for stocks which fall under these basic rules. Now calculate Stop Loss (SL), Target (TG) and do basic technical analysis (like support, resistance, overbought, oversold e.t.c)

Learn the technical analysis of the charts for intraday or swing purposes check the tips given by advertisers on various sites like valuenotes.com, icicidirect etc. counter check them with your studies and then take the decision. Do not work on tips untill you yourself have studied and analyzed them. It is good to select stocks for intraday for the sectors you have already picked up or traded before. All you need to do is refine them on your own study. If you do not find them good based on your study just reject them. Also try to analyse the point where the tips goes strongly right and at that point try to note what cnditions met for that movement. It will enhance you skill.

The major problem which most of the people encounter is that they are able to find high volume stocks and can apply macd,rsi,SSO,EMA cross over etc. to it, but they are not able to find stop loss and target because finding it in a normal way takes lot of time and in that time, many time trend will be over. So, here are some other methods for you.

Methods to Find Stop Loss and Target

I suggest you to regularly use the stop loss for whatever time frame you trade, the reason being that the indian market is very much volatile indeed the most volatile market where we dont know when the major reversal can occur and all your indicators can go wrong.

In my opinion you should keep the stoploss based upon you entry point + the total Percentage of your amount you can afford to loose in one trade.

1. The simplest method for Stop Loss in my opinion is to keep the trigger at 2-3 points below the last low or above the last high. According to MACD RSI OR STOCHASTIC you can place the stoploss at 2-3 points below the lowest or above the highest candle.

2. Choosing the risk is totally dependent upon you. Some Afford total risk of 1 % on their trade or some even 2-3 Percent. Depends from personality to personality.

But make sure that either the setup is good enough that Stop Losses are not hit frequently or better you keep Stop Loss much below i.e take higher risk only if the setup is not too good.

Now about the Target: what ever setups you create may it be stochastics, rsi or macd has it own exit strategy and that too on right point. The reason you are not getting much profit is because you havent mastered the strategy. Try to understand the working of these indicators and you will behave automatically on when to exit from trade and when to not.

So, this was an small effort from me for intraday traders to make them understand “How to find Stocks for Intraday Trading”. You can also read my article on “How to Start Intraday Trading“.

- About the Author: CapitalVia Global Research Limited is Best Stocks and Commodity investment Advisory company in India. It provides recommendations or tips to invest in National Stock Exchange (NSE), Multi Commodity Exchange (MCX), National Commodities Exchange of India (NCDEX) etc. Copyright © 2010 CapitalVia Global Research Limited. All Rights Reserved. Reprint of this article is allowed as long as due credit is given to the author and links are left intact. Article Source