V. 22:6 (86-88): Websites For Traders: MarketVolume.com by David Penn
In the secular trinity of technical analysis (“the Price, the Volume, and the Passage of Time”), volume is included
for good reason. While there can be no market without price, there can also be no price movement — and thus, no profit — without a pricing mechanism. I’ll never forget seeing legendary Austrian economist F.A. Hayek in a PBS interview from the late 1970s criticizing socialism for having, at root, no way to determine the price of anything. The absence of a pricing mechanism — or, more accurately, the substitution of a bureaucratic official or department for a real pricing mechanism — was one major reason why nations like the Soviet Union continuously suffered from shortages, in spite of their productive capacity. How many apples would you
sell if the price was supplied not by buyers and sellers of apples, but by some committee half a country away?
Fortunately for capitalists and market participants, we do have a pricing mechanism, and that pricing mechanism is most clearly expressed by volume. What is volume in the context of markets? Volume represents the actual supply and demand that moves prices
higher and lower.