Stock Trading.

  
Volume - Price.

What is more important?

Each type of price movement is defined by specific VMA behavior. When you analyzing just a price you see just a half of picture. What you do not know cannot hurt you but what you do not know about market can kill you as a trader.

Volume and Price affect each other!

Usually when the index is on an up-trend and the VMA increases you can expect the index to go down. BUT, if the market on a whole is on an up-trend (Bull Market), you can not put as much importance into the volume spike as it may cause the index to go down, but only slightly before it re-establishes it's general up-trend, and vice-versa. So, during a Bull market a big volume spike can change index to go down and small volume spike can correct index up according to the general up-trend.

On the chart below you can see that during the Bull market the index met several times big VMA which make index to go down, but, those volumes (blue lines) weren't big enough to change general trend of the market. At the same time you can see how small peaks (green lines) of VMA corrected index according to the general movement up

S&P 500, 10/2001 - 12/2001, VMA 1 day

During a Bear market you can watch the reversal behavior of the volume. It has to be big VMA spike to make index to go up and small spike of VMA can correct it down again. Since that do not take any volume moving average spikes to the upside to seriously unless it is of an unprecedented scale.

Usually when index is in its support (resistance) channel you can see unprecedented VMA peak or series of the peaks. The explanation is very simple: the wealthy professional traders are buying (during support) or selling (during resistance) a huge amount of securities (do not forget that the one of main differences between professional and nonprofessional trader is amount of money invested into the market).

S&P 500, 8/2001 - 11/2002, VMA 1 day

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