Section 3 - Chapter 4 - Introduction to Volume Analysis

Section 3 - Chapter 4 - Introduction to Volume Analysis - Presented by Rohan Sharma - The CMT Coach - Chartered Market Technician CMT Level 1 Study Material - CMT Level 1 Chapter Wise Short Notes - CMT Level 1 Course Content - CMT Level 1 2025 Exam Syllabus Visit Site : www.learn.ptaindia.com and www.ptaindia.com

1. Chapter 4 - Introduction to Volume Analysis Section 3 – Trend Analysis Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

2. Agenda Define volume Define open interest Define the terms related to volume as discussed in this chapter Describe how volume provides information on liquidity and participation Describe how volume adds perspective to price action This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

3. Volume Terminology 1. Trading Volume – The total number of shares, contracts, or units traded in a specific period. 2. Relative Volume (RVOL) – Measures current volume compared to the average volume over a period. A high RVOL (above 1) indicates unusual trading activity. 3. On-Balance Volume (OBV) – A momentum indicator that adds volume on up days and subtracts on down days to measure buying and selling pressure. 4. Accumulation & Distribution (A/D) Line – A volume-based indicator that tracks the flow of money into or out of an asset. Volume-Weighted Average Price (VWAP) – The average price of an asset adjusted for volume, often used by institutional traders . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

4. Volume Terminology 6 . Tick Volume – Measures the number of price changes (ticks) within a period, used when actual volume data isn't available (e.g., Forex). 7. Buying Volume – Volume of trades executed at the ask price, indicating buying pressure . 8. Selling Volume – Volume of trades executed at the bid price, indicating selling pressure. 9. Volume Delta – The difference between buying and selling volume, helping identify imbalances . 10. Volume Profile – A chart tool that plots volume traded at different price levels rather than over time. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

5. Volume Terminology 11. Volume Spike – A sudden, abnormal increase in trading volume, signaling potential breakouts or reversals. 12. Chaikin Money Flow (CMF) – A volume-based oscillator that measures buying and selling pressure. 13. Market Depth – Shows bid and ask prices along with the volume available at each price level. 14. Volume Oscillator – The difference between short-term and long-term volume moving averages, indicating volume trends. 15. Ease of Movement (EOM) – A volume-based indicator that measures how easily a stock moves up or down. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

6. Volume Terminology 16. Negative Volume Index (NVI) – Focuses on days with lower volume, assuming smart money moves in low-volume periods. 17. Positive Volume Index (PVI) – Focuses on high-volume days, assuming retail traders dominate in high-volume conditions. 18. Cumulative Volume Index (CVI) – Measures net inflow/outflow of volume over time. 19. Money Flow Index (MFI) – A volume-weighted RSI indicator that detects overbought or oversold conditions. 20. Klinger Volume Oscillator – A volume-based indicator that identifies long-term trends in money flow. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

7. Volume Terminology 📖 Cheat Sheet for Using Volume in Trading ✅ High Volume Confirms Trends – A price move with strong volume is more reliable. ✅ Low Volume = Weak or False Moves – Breakouts on low volume may fail. ✅ Look for Volume Spikes – Can indicate trend reversals or major breakouts. ✅ Use VWAP for Intraday Trading – Helps determine fair price levels. ✅ OBV & A/D for Trend Confirmation – Helps see whether volume supports price movement. ✅ Monitor Buying vs. Selling Volume – Helps assess market sentiment. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

8. Why Volume is Important? 🔍 Interpretations: Why Volume is Important? 1. Confirms Price Action – Rising prices with strong volume suggest strength; falling prices with high volume suggest weakness. 2. Detects Trend Reversals – Volume spikes near key support/resistance levels may indicate reversals. 3. Filters Out False Breakouts – If price breaks a key level without strong volume, it may be a fake move. 4. Helps Identify Liquidity – High-volume assets tend to have lower spreads and smoother price movements. 5. Guides Institutional Trading – Volume-based indicators like VWAP are commonly used by big traders. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

9. Importance of Volume in Market Analysis 📌 Key Facts on Volume in Market Analysis 1. Confirms Price Trends – Strong trends are supported by high volume, while weak trends have low volume. 2. Indicates Market Strength – High volume shows strong interest and participation in a move. 3. Helps Detect Reversals – Volume spikes at key price levels can signal upcoming trend changes. 4. Filters False Breakouts – A breakout with low volume is more likely to fail . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

10. Importance of Volume in Market Analysis 📌 Key Facts on Volume in Market Analysis 5 . Measures Liquidity – High-volume assets have lower spreads and less slippage. 6. Volume Leads Price – Unusual volume activity can indicate upcoming price movements before they happen. 7. Institutional Activity Detection – Large volume movements often indicate institutional buying or selling. 8. Affects Volatility – Higher volume typically leads to increased volatility and price action. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

11. Volume in Market Analysis 📖 Cheat Sheet for Using Volume in Market Analysis ✅ High Volume = Strong Move – Price moves backed by high volume are more reliable. ✅ Low Volume = Weak Move – A price move on low volume is less likely to sustain. ✅ Volume Spikes Near Key Levels – Can signal breakouts or reversals. ✅ Breakouts Must Be Supported by Volume – A valid breakout should have significantly higher volume than the average. ✅ Divergence Between Price & Volume – If price rises but volume declines, the trend may be losing strength. ✅ Use Volume-Based Indicators – Tools like On-Balance Volume (OBV), VWAP, and Money Flow Index (MFI) help confirm trends. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

12. 🔍 Interpretations: Why Volume Matters? 1 . Stronger Confirmation of Trends – If a stock is rising on high volume, it's more likely to continue. 2. Identifying Potential Reversals – Volume spikes at support or resistance levels may indicate a change in direction. 3. Better Trade Entries & Exits – Entering on high-volume moves increases the chance of success. 4. Market Sentiment Indicator – Rising volume in uptrends suggests confidence, while falling volume in downtrends signals fear. 5. Detects Smart Money Activity – Institutions often accumulate or distribute positions with high-volume transactions. This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

13. Volume Based Trading 📌 Key Takeaways for Volume-Based Trading ✅ High volume confirms trends and breakouts. ✅ Divergence between price & volume signals reversals. ✅ Low volume breakouts are more likely to fail. ✅ Volume spikes can signal trend continuation or reversal. ✅ VWAP is useful for intraday traders to find fair value entries . This Content is Copyright Reserved Rights Copyright 2025@PTAIndia

14. Next Chapter 5 – Volume , Open Interest & Price Section 3 – Trend Analysis Presented By : This Content is Copyright Reserved Rights Copyright 2025@PTAIndia