The ABNORMAL VOLUME Blog!
Volume traders unite! We are happy to present another resource for the trading community on one of our favorite topics - VOLUME! As many of our clients know, our team highly values volume analysis in our trading and today we will be discussing how we implement our very popular ABNOMRAL VOLUME tool into our trading analysis!
When our team enters the development phase for a trading tool, we look to solve problems. Many new traders understand the basics regarding volume but often fall short at identifying key parameters to assist them in their trading.
For example, a trader may be far enough into their journey that they run a general filter for the setups they take which might be referred to as a "liquitidy filter". This confirms that there is ample liquidity in the stock they are trading (mostly small cap stocks) to ensure that they are able to enter and exit the stock with ease, and the stock moves with a sense of organic fluidity.
High volume stocks act much differently than low volume stocks, and the latter often present with a large amount of issues. Despite how important this basic filter is, it does not offer traders any TECHNICAL edge. To identify a technical volume edge, we must first identify the type of setups that traders often play so we can practice where to LOOK for the volume edge.
Today we will be focusing on breakout charts to the long side, and how the ABNORMAL VOLUME indicator can offer KEY INSIGHT into these moves!
WHAT IS ABNORMAL VOLUME?
We wrote code to alert traders to an abnormal increase in volume during a specific period of time. For example, the code will automatically detect when there is a surge in volume in contrast to the rest of the candles. The beauty of this indicator is that it highlights big volume - even in an enviornment where a high amount of volume is already present. This can signal the start of a trend change or breakout and is highly useful in any long traders arsenal.
Follow along as we detail how ABNORMAL VOLUME can be incorporated into many different trading setups!
On 7/14/2022, Netflix remained rangebound for over 3 hours as bulls and bears fought to take control of the stock. As you'll notice, bulls attempted to break the stock outside of its channel - to no avail. They did not have the demand to complete the takeover. If you had a buy order at the top of the channel, you likely would have gotten flushed. This can not only be frustrating, but unnerving. Notice when the REAL breakout takes place, there is an Abnormal Volume signal. This lets us know that there is serious demand at hand and that price has a much higher liklihood of completing the breakout!
On 7/15/2022, $USEA gapped up and immediately went parabolic in the morning. This move was followed by some major indecision as traders attempted to determine whether this move could be sustained. After a period of consolidation the Abnormal Volume indicator gave a signal showing an abnormally large amount of volume coming into the stock!
On 7/18/2022, $EVTL ran big in premarket but could not sustain its gains and opened nearly flat from the day prior. With a series of lower highs, you can be sure that shorts have taken advantage of the opportunity presented to them and are actively trading the name. After a sustained period of rangebound action in which neither bulls nor bears were able to take control of the stock, our Abnormal Volume indicator gave a signal and let us know that bulls have indeed taken control - A major parabolic spike followed!
On 7/19/2022, $SIDU started the morning with a parabolic spike and a subsequent lower high. The morning started with bearish price patterns that quickly shifted into bullish price patterns (See Volume Forecast Indicator).
When $SIDU was holding the previous high of day as support, we saw multiple Abnormal Volume candles which let us know that there was interest from the bulls to take this higher. New high of day followed!
On 7/20/2022, $TBLT presented with a strong move to the upside in the early hours, followed by some major indecision and rangebound action. There was one attempt to take bullish control of the stock, but it failed.
Notice how there was very little volume at this time. Then Abnormal Volume gave a signal and identified the REAL breakout!
On 7/20/2022, $SDIG gapped up premarket and met some heavy resistance at $2.85 - with all attempts to break it failing. Upon market open the Abnormal Volume signal gave us multiple alerts that demand was high while price ran up to test this level again - but this time it broke resistance and did not look back!
On 7/21/2022, $EVTL gained momentum and started the day with a healthy bullish move, followed by a series of lower highs. When the breakout started, Abnormal Volume gave us multiple signals letting us know that this move is likely to sustain itself and continue higher!
On 7/25/2022, $FAZE started the morning with a nice parabolic move that quickly sold off. As price curled and made its way back towards highs, traders were trying to determine if there was enough demand to fuel the move to new highs. One way to measure this is the Abnormal Volume indicator, giving REAL insight into the stocks demand.
By now we are sure that everyone can see how Abnormal Volume plays a KEY ROLE in preparing and spotting breakouts! This indicator is available for the Thinkorswim and TradingView platforms. As a token of appreciation for reading the blog, you may use promo code STT10 for 10% off your Abnormal Volume indicator purchase! Stay tuned for the next blog!
*** Link to Abnormal Volume For TradingView: ***
*** Link To Abnormal Volume for ThinkOrSwim ***
*** Link to open a TradingView account and get a free $30 credit! (Must be a new customer) ***