The first consists in steady opinion that market movement should be accompanied by volume. The certain element of truth in it is. Really, if the rise in prices is not supported by volume it means unwillingness from outside new traders to enter into the market, therefore trade occurs basically between its today’s participants and some number of again arriving and decreasing players. Sensibly arguing, it is possible to think quickly that volume growth – a two-edged sword: after all if someone buys, someone should also sell. And here there is a mature idea: instead of whether there can be a volume growth in the growing market a sign of achievement of top? After all the volume is an advancing indicator for an estimation of future dynamics of the prices. But one business when the volume grows at break by the market of serious level of resistance, and absolutely another – at the moment of a finding of the prices in the top part of the schedule where nothing prevents to move to the prices in any direction. In the first case volume really friend of the buyer, and in the second – it, is faster its enemy.
The second explanation is covered available propensities of people to forget all sensible reasoning when they see an active rise in prices. It seems to them that they will not be in time and will appear at the tail-end of the good luck which has already smiled many, who has bought actions. Such traders hasten in the market, and it is natural – soon receive losses. This category of investors frequently also provides that growing volume which we constantly observe at the peak prices.
How to avoid so widespread error as purchases at top?
The answer contains in several simple rules:
Never buy at the growing volume if the prices are in the top part of the market and there are no weighty reasons for the further rise in prices.
Buy in the growing market supported in volume, only if observe break through the resistance level.
Always remember: against your purchase there is a sale where the trader leaves the long transaction or enters into a short position.
Level of support and resistance level:
Error: Sale in the basis
In a trap “sale in the basis” comes across not smaller number of traders if to compare to a situation “purchase at top”. Strangely enough, but this case is familiar with disassembled above: the same raised volume in a combination to strongly falling prices. Again, if we give in to a temptation to lean in the analysis against dogma about the volume supporting a trend, or we will appear subject to a greed impulse, seeing, as others earn on market falling for certain we will lose.
Certainly, the raised volume can be interpreted as inflow of the acute and informed traders assured of the further fall of the market. Perhaps, all indeed, but hardly you will manage to stand with a short position adjustment up moving market movement, capable to appear very intensive, without leaving it at a loss, and then observing new falling of the prices. Besides, do not forget, many of these traders hedges the positions options or inter market spreads that is why can maintain notable movements of the market in both parties without any fear to receive losses.
How to avoid such error? In this respect there are the rules similar with the earlier stated.
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Tags: currency strenght mq4, currency volume mq4, METER TREND MQ4