Indicators  |  JUN 2005

Spike Up The Volume by Giorgos Siligardos, Ph.D.

Stocks & Commodities V. 23:6 (30-37): Spike Up The Volume by Giorgos Siligardos, Ph.D. A long spike appearing in the volume histogram usually catches your attention. But how do these spikes in volume really affect indicators and prices? Volume can be considered to be the fuel of the markets. When the daily trading volume of a security is extremely high compared to its average daily values, that means it’s attracting a large number of buyers or sellers. Oftentimes, this huge rush leads traders awry. In his article “A Tale Of Two Indicators,” Andrew Tomlinson gave an interesting example of two volume indicators that diverge, giving opposite signals. The daily volume spike along with a gapping down hammer created these signals, and Tomlinson noted that this divergence was due to the nature of the formulas of these volume indicators. Here I will discuss the concept of volume and show that volume spikes actually do not provide signals that indicate which way prices will go, but rather provide instantaneous alert signals.

by Giorgos E. Siligardos, Ph.D.