publish2018-03-05 10:46 pm

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Low Volume Market vs. High Volume Market

low volume market vs high 2

The stock market is built on investors trust. There are several ways to measure how reliable a stock exchange is for traders using complex analytical tools to evaluate it. On the same token, low volume market vs. high volume market is used for traders to assess the future price variation of assets or commodities. Some forex traders are aware of the regular pattern of low volume market during some months of the year and a high volume market at others months. This cycle entitles them to buy during the low volume market season at a lower price and hold the assets for the high volume market getting better profits. The low volume market vs. high volume market can be part of a trader or investor strategy.

What is volume market or volume of stock?

The volume market is the amount of trading done during a period, or how many transactions are done for a period. The volume market is frequently used as a synonym for a volume of stock when it refers to particular assets.  The volume of stock, refer to the amount of shares sold or bought during a period, or the number of shares that changed hands for a given period.

What is low volume market?

     Low volume market is the decrease in the number of trading for an asset. The standard level to be categorized for low volume market is a lower than 10000 trades for a day. Low volume market assets are considered harder to sell. In some cases, the company is categorized as illiquidity, but not for the loss of his assets value, but for the hard to sell or cash his shares. Consequently, his share demand will decrease leading to falling in the asset’s price.

What is high volume market?

    High volume market is considered an increase of two or three folds from the average daily volume or ADV, There are some scholars, who consider any standard deviation of more than 2 times the ADV a high volume market for the asset. To determine the high volume market, the daily volume is compared with the average daily volume (ADV) of the previous 50 days. The high volume market could sing strong assets or an expansive economy.

What is Low Volume Market vs. High Volume Market?

     Volume is a market strength indicator. Several traders use volume as a strategy for trading and base their assets selection on its trading volume. Low volume market vs. high volume market is a dual approach; one part relies on buying some assets in low volume market at a lower price, wait until the market volume changes and becomes high volume market. The low volume market vs. high volume market or buying in low volume market and selling in high volume market is popular among Forex traders. The forex traders know the volume cycles, and they anticipate it.

Understanding Low Volume Market vs. High Volume Market

  • Volume marketnumber of shares or assets that change hands during a day or any given period
  • Asset’s Price based on volume; Volume itself does not affect the assets price.
  • Volume market cyclessome assets such as Forex are a trade at a lower level during some months of the year or they are seasonal and trade at higher volumes at other months or a different seasons. The volume market cycles are well known and can be reviewed on several yearly price charts and ADV.
  • Trading on volume, some trader used the volume market as an indicator for their assets selection.
  • Average daily volume is the record of the number of shares that change hands during the last 50 days. These averages are added and then it is divided into 50 to get the Average daily volume or AVD.
  • Volume market as trading indicator some traders include any change in the volume market as corroborative signs either for the start of a trend trading, or the trend trading reversal or the end of it.
  • A higher volume market without price variationmay indicate the imminent trend trending reversal
  • A higher volume market with great price increasing may indicate an uptrend trading in place or its beginning
  • A higher volume market with price decreasing may indicate a downtrend trading in place.

Forex trade Low Volume Market vs. High Volume Market

Forex traders known the seasonal volume market variation, they have done the technical analysis and compared price charts and average daily volume for several years to be sure when the cycle start and when it ends historically. With the volume cycles in mind, they apply their trading strategy:

a)Forex traders, who use Low Volume Market vs. High Volume Market strategy, buy their forex a couple of weeks before the cycle reversal. They usually buy the forex at a lower price for lower demand.

b)Forex traders, who use low volume market vs. high volume market strategy, sell their forex or exchange it after the low volume market changes into a high volume market. They get profits from the higher demand of forex, which produces that, the exchange rate increase in favor of them.

Investor and stock trader Low Volume Market vs. High Volume Market

  Investors after doing the fundamental and technical analyses, sometimes they decide to buy assets from the low volume market companies and hold them over time. Even though the volume market does not affect the asset’s price directly, some investors consider that buying assets from a reliable company, which is in a low volume market, will generate significant profits once their volume market increases and more investor know them. They consider the reason for the lower asset’s price to be due to the lack of publicity or for it being relatively new to the market. Consequently, they buy those assets and hold them over time anticipating its price will skyrocketing and they will cash them.

The Low volume market vs. high volume market is better as a confirmatory indicator than a call to action instrument for most traders. It works better when used for trend trading confirmation of other indicators. The volume itself does not affect the asset’s price.

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