Market volume is a crucial piece of information that many penny stock investors ignore often. When you do fundamental analysis of a stock, volume does not enter into the picture. But when you do technical analysis, volume is a crucial piece of the puzzle that many technicians under use. Volume can help you interpret the price action in a much better manner. Volume is very important when you trade penny stocks because the liquidity in this market can thin out pretty fast.
Volume And Prices Are Two Interlinked Pieces Of The Stock Market Puzzle
Volume can provide information about the price change before it actually happens plus it will also help in interpreting the price action. In fact volume and price are interlinked as both the price and the volume of sales in stocks are the products of the same market mechanism. So, if you will look at price without the volume or look at the volume without the price, you will be driving erroneous results.
Research has shown that volume is very important in stock analysis especially for the smaller capitalized overlooked penny stocks. As a penny stock trader, you need to employ volume analysis extensively when you do research about a particular stock. What is the best penny stock trading tool? Guess? It’s education and research. Good education is what will give you the cutting edge as a trader. Yes, as a penny stock trader, your goal should be to educate yourself on how the market works and how to identify the best stocks in the market. Now, volume analysis can help you identify trend shifts much earlier by taking a deep look inside trends!
Investing With Volume Analysis; Identify, Follow And Profit From Trends
Buff Pelz Dormeier is an award winning stock market analyst who has written the book Investing with Volume Analysis: Identify, Follow, and Profit from Trends