The amount on a standard options data is probably the most misinterpreted of all technical symptoms used by swing investors. There is only twice when it is actually even useful. In fact, you could trade any share without even looking at it!
First a definition...
Stock data amount is the number of stocks dealt during a period.
Usually plotted as a histogram under a data, amount symbolizes the attention level in a standard options. If a standard options is dealing on low amount, then there is not much attention in the share. But, on the other hand, if a standard options is dealing on large quantities, then there is a lot of attention in the share.
Volume basically tells us the emotional pleasure (or lack thereof) in a standard options.
Liquidity
Stock data amount also shows us the amount of assets in a standard options. Liquidity just basically represents how easily it is to get in and out of a standard options.
If a standard options is dealing on low amount, then there aren't many investors engaged in the share and it would be more hard to discover a individual to buy from or provide to. In this situation, we would say that it is illiquid.
If a standard options is dealing on large quantities, then there are many investors engaged in the share and it would be more readily found a individual to buy from or provide to. In this situation, we would say that it is liquid.
Let's look at a number of common amount styles on a standard options chart:
volume on a standard options chart
A rise in amount can often indicate the end of a pattern.
Here, on the left aspect of the data, this share starts to fall. Volume raises considerably as more and more investors get nervous about the rapid decrease of this share. Eventually everyone loads in and the promoting pressure ends. A change arises.
Then, in the middle of the data, amount starts to blend off (circled) as investors begin to weary in this share. There are no more customers to push the share greater. A change arises.
Then, on the right aspect of the data, amount starts to improve again (second arrow) and another change arises.
This data is a good example of how the pattern of a standard options can reverse on large quantities or low amount.
Mistakenly, some investors think that stocks that are "up on greater volume" indicates that there were more customers than suppliers, or stocks that are "down on greater volume" indicates that there are more suppliers than customers. Wrong! Regardless if it is a large quantities day or a low amount day there is still a buyer for every home owner.
You can't buy something unless someone is promoting it to you and you can't provide something unless someone is buying it from you!
Volume and Price
So if all amount symbolizes is attention in a standard options, when is it useful? The only time amount is useful is when you incorporate it with cost. For example:
Expansion of variety and large quantities - If a standard options is moving along side to side in a small variety and all of sudden it breaks to the advantage with a rise in variety and amount, then we can consider that there is improved attention in the share and it will probably continue greater.
Narrow variety and large quantities - If a standard options has very large quantities for today but the variety is small then this is called rolling. In this situation, considerable build up or submission is developing.
Ever heard the saying, "volume comes before price"?
Many periods you will see amount pick up right before a considerable switch in a standard options. You can see that attention is building. On a standard options data, look for amount to be greater than the previous day. This is a sign that there may be a considerable switch to come.
Take a look at this example...
chart of amount comes before price
This share rallied for three days in a row on relatively low amount. Then, on the fourth day, amount improved considerably. This improve in amount began the switch to the downside.
Interpreting amount on a standard options data can be confusing! Just remember that the cost action is the most important aspect on a data.
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