Volume and price are the foundation of technology. It is easy for most investors to only focus on price and ignore trading volume and turnover rate. Volume refers to the trading volume of a stock per unit time, including daily trading volume, monthly trading volume, etc.; price refers to the price of a stock, which is based on the closing price, as well as the opening price, the highest price, lowest price. There is a certain internal relationship between the rise and fall of a stock's price and its trading volume, that is, the volume-price relationship. Investors can buy and sell stocks by analyzing this relationship. The picture above shows the recent K-line and daily trading volume of a certain monster stock. The daily trading volume is represented by each bar. The coordinate value on the left corresponding to the horizontal direction of the bar is the trading volume of the monster stock on that day. If the closing price is higher than the opening price, it means that the day has risen, and the trading volume is painted in red; otherwise, it is painted in green. MAVOL5, MAVOL10, and MAVOL20 are the 5-day, 10-day, and 20-day moving averages of trading volume respectively.
Volume and its applications
Trading volume is the number of target transactions within a period of time.
A note on trading volume:
-
Trading volume represents market divergence, because transactions are completed only when there are purchases and sales; the greater the trading volume, the greater the market divergence. A common view is that the greater the trading volume of a stock, the higher its price will be. This is wrong. Of course, the greater the trading volume, the more attractive the stock is to the market. Trading volume is relatively easy to fake. The main control force can easily control the trading volume through market washing. It needs to be identified in combination with other indicators.
-
Shrinkage: It shows that the market agrees on the later trend. There are two situations: first, market participants are very optimistic about the market outlook, resulting in only people selling, but no one buying, so the volume shrinks sharply; second, market participants are very optimistic about the market outlook, and only people are buying, but no one is buying. Sell, so the volume shrinks sharply. When the market falls and shrinks, when encountering this situation, you should resolutely exit the market, wait until the volume shrinks to a certain extent, and then buy again when it starts to increase the volume and go up. Similarly, when the price rises and the volume shrinks, when encountering this situation, you should resolutely buy, wait for profits, and wait until the stock price fails to rise and sell in huge quantities.
-
Increased volume: Generally occurs at the turning point of a turning point in the market trend, and the differences between the various forces in the market gradually increase in the market outlook. Compared with shrinking the volume, there may be a lot of falsehood in increasing the volume. This is because it is very simple for the main control force to use the chips in their hands to release huge amounts of money.
-
Stacking volume: When the main force wants to pull up, it often makes the trading volume very beautiful. Over a period of time, the trading volume slowly increases, and the stock price slowly pushes up. The trading volume forms a earth-like shape on the recent K-line chart. The more beautiful the pile is, the more likely it is to rise sharply. On the contrary, the high volume indicates that the main force no longer wants to play and wants to ship goods in large quantities.
-
Irregular volume expansion and contraction: This situation is usually caused by a monster dealer who suddenly releases a historically huge amount when the weather is calm, and then disappears, and then disappears. Generally, it is caused by a weak bookmaker. Attract market attention for shipment
Turnover rate and its applications
Turnover rate, also known as turnover rate, refers to the frequency with which stocks change hands in the market within a certain period of time. It is one of the indicators that reflects the liquidity of stocks. For example, the total share capital of a certain stock is 10 million shares. When the cumulative number of traded shares reaches 10 million shares, the turnover rate of the stock is 100%, which means that theoretically all the shares of the stock have been bought (sold). Read it again.
Calculation formula: turnover rate = trading volume within a period of time/number of shares in circulation x 100%
A note on turnover rate:
-
The higher the turnover rate, it means that the stock is more actively traded and is a popular stock. On the contrary, it is an unpopular stock that fewer people pay attention to. Stocks with particularly high turnover rates (such as monster stocks) are often the targets of short-term capital pursuits. The stock prices fluctuate greatly and the risks are relatively high.
-
The daily turnover rate of most stocks is between 1 and 2.5%, and the turnover rate of 70% of stocks is below 3%.
-
Stocks with a high turnover rate have better liquidity, will not have liquidity problems, and are easy to enter and exit the market.
-
The turnover rate is like the horsepower of a car engine in physics: the greater the horsepower, the faster the car runs; the greater the turnover rate, the more power a stock has.
-
When the stock price is at a low level, investors should pay attention when the turnover rate reaches about 4-5% on the same day, and they should be more vigilant when the turnover rate exceeds 10-15% on the way up.
The relationship between trading volume and turnover rate
The formula for turnover rate: turnover rate = trading volume within a period of time/number of shares in circulation x 100%
It can be seen from the formula of turnover rate that since the number of shares in circulation is basically unchanged within a period of time, trading volume and turnover rate are directly proportional, so the relationship between trading volume and stock price and the relationship between turnover rate and stock price are equal. For price, we only need to look at the relationship between trading volume and stock price.
In fact, this is also true. A large amount is usually accompanied by a very large turnover rate, and a shrinkage is accompanied by a very small turnover rate.
The advantage of turnover rate is that each target is relatively comparable, while the trading volume and number of shares in circulation are different in size and are not comparable.
The relationship between trading volume and stock price
Changes in price trends cannot be judged based on trading volume alone, at least there must be price confirmation. Trading volume is one of the important factors in price changes, and it is also a factor that may cause substantial changes, but most of the time, it only acts as a catalyst.
-
When the stock price rises, there must be a combination of volume and energy. If the price rises and the volume increases, it means that the rising momentum is sufficient, indicating that the stock price will continue to rise; on the contrary, if the volume shrinks and rises, it is regarded as an empty increase without volume, and the coordination of volume and price is not ideal. It indicates that the stock price will not have much room to rise or that it will be difficult to continue to rise.
-
The same goes for the stock price drop. A negative drop in volume means that the market is in a weak position. A very small trading volume can bring down the stock index. A negative drop will inevitably be followed by a heavy drop in volume, which is extremely detrimental to many parties.
-
When the stock price fluctuates in a range, the price breaks through but lacks the cooperation of trading volume, which indicates that the market has not really changed the current operating range, so more caution should be exercised. Once it breaks through, it will be accompanied by a sharp increase in trading volume.
-
If market volume remains sharply lower, it is a warning that the current trend is beginning to weaken. Especially when the market reaches a new high or a new low under light trading volume, the above judgment is more accurate. Making new highs or lows on light volume should be questionable
-
Trading volume also has patterns. When the trading volume forms an arc bottom and the stock price also forms an arc bottom, it often indicates that the stock will have a greater opportunity to rise in the future.
Conclusion & Communication
Follow the WeChat public account: Zhuge Shuo Talk for more content. At the same time, you can also get an invitation to join the quantitative investment seminar group to communicate and discuss with many practitioners and technical experts. The number of places is limited, so don’t miss it.
Writing articles is not easy. If you think this article is helpful to you, please give it a like.