Volume analysis

A typical day trader looks for two things in a stock: liquidity and volatility. Liquidity allows you to enter and exit a stock at a good price. More volatility means greater profit or loss. (Kuepper, 2011)
Volume bars are placed underneath the bar chart that shows the volume at the exact price. Figure 6

Volume analysis allows trader to analyze the price at which high volume of investments are made. That implies that an aggressive buyer/seller is pushing the price that can be used as the additional signal to enter the position or exit.

MACD indicator. In technical analysis the MACD (Moving Average Convergence/Divergence) is a momentum indicator that shows the relationship between two moving averages.

The MACD is simple and reliable. It is calculated as a difference between the fast and slow moving averages. The most popular is the difference between a security's 26-day and 12-day Exponential Moving Averages (EMAs). MACD is a momentum oscillator and is plotted as a line that moves above and below zero line (center line).

Figure 7

D. Different stocks

Each stock behaves in its own way, and traders use to describe patterns that can join the groups of stocks that perform similarly in order to use this data to trade:

1) Slow stock – stocks that are moving in a flat direction, without any significant change in the stock price.

2) Thin stock – stock with a little volume traded throughout a day trade session. These stocks are very dangerous, due to the fact that the price can be changed very fast without having any support and resistance.

3) Thick stock – stock traded at a high volume throughout a trade session. These stocks are smooth, and do not change the price unexpectedly.

Patterns

After taking into consideration all these indicators, trends, trader should provide a research if the stock gives him a known pattern, that are easy to determine.

Double top shows that stock is weak at the price level where stock was once. Trader enters with a short position and puts a stop function above the double top level.

Figure 8

Parabolic chart moves as the geometrically known parabolic figure. The figure can also be as a base of consolidation price level, where it moves in a small range of price changes, after breaking the highest/lowest point stock can move really fast giving the opportunity to earn a profit. Base of consolidation should consist not less than 5-6 bars.

Figure 9

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