Price + Volume = Price Movement by Tim Ord
Hereís how you can use price and volume to determine buy and
I use a lot of different indicators and methods,
but one that has been consistently successful
is the price/volume relationship at support
and resistance levels. Support or resistance
areas occur at previous highs and lows. Prices
bounce off previous highs and lows and develop
trading ranges. I will show you how
price and volume react to previous highs and
lows, and why price pushes through or reverses
at these points.
Previous highs and lows in a stock or index define current
support and resistance areas. A previous high or low in a stock
or index is referred to as a swing. I draw a horizontal trendline
from the previous swing high or low to determine at what
price support or resistance will appear in the future. These
previous swing highs and lows are points where I make
decisions for placing buy or sell orders. The horizontal lines
drawn from previous highs and lows indicate where the
support or resistance may come in. The line graph of a stock
or index in Figure 1 illustrates a swing high and low.
By studying the works of Richard Wyckoff, the master of
price and volume, I have developed some rules using the
price/volume relationship. Wyckoff developed techniques in
the 1930s that combine price and volume of equities with
price predictability. The techniques he developed stood the
test of time and still work to this day. I expanded on his ideas
and came up with several rules that I use daily in my trading.
Letís go over these rules and look at a price history to see
where buy and sell signals developed.