The Undeclared Secrets That Drive the Stock Market
| Date: 21 April 2011, 15:04
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Volume Spread Analysis, is a new term which describes the method of interpreting,
analysing and understanding a bar chart displayed on your computer screen. A chart
with the high, low, close and volume will graphically show you how supply and demand
presents its self to you in a form that you can analyse.
For the correct analysis of volume one needs to realise that the recorded volume
contains only half of the information required to arrive at a correct analysis. The other
half of the information is found in the price spreads. Volume always indicates the
amount of activity going on. The corresponding price spread shows the price movement
on that volume [activity]. This book is about how the markets work, and, most
importantly, will help you to recognise indications as they occur at the live edge of a
trading market. Indications that a pit trader, market maker, specialist or atop
professional trader would see and recognise.
Volume Spread Analysis seeks to establish the cause of price movements and from the
cause predict the future direction of prices. The cause is the imbalance between
Supply and Demand in the market which is created by the activity of professional
operators. The effect is either a bullish or bearish move according to market conditions
prevailing. We will also be looking at the subject from the other side of the trade. It is
the close study of the reactions of the specialists and market makers which will give
you a direct access to future market behaviour. Much of what we shall be discussing is
also concerned with the psychology of trading, which you need to fully understand
because the professional operator does and will take full advantage wherever possible.
Professionals operating in the markets are very much aware of the emotions that drive
YOu (and the herd) in your trading. We will be looking at how these emotions are
triggered to benefit professional traders and hence price movements.
Billions of dollars change hands in the world's stock markets, financial futures and
currency markets, every working day. Trading these markets is by far the largest
business on the planet. And yet, if you ask the average businessman or woman why we
have bull markets and why do we have bear markets, you will receive many opinions
but most will have absolutely no idea on the underlying cause of any move. These are
intelligent people. Many of them will have traded in the market in one way or another. A
large number will have invested substantial amounts either directly or indirectly in the
stock markets.
Financial trading may be the largest business in the world but it may be also the least
understood business in the world. Sudden moves are a mystery to most, arriving when
least expected and appearing to have little logic attached to them, frequently doing the
exact opposite to a trader's intuitive judgement. Even those who make their living from
trading, particularly the brokers and the pundits, who you would expect to have a
detailed knowledge of the causes and effects in their chosen field, very often know little
about how the markets really work.
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