When stock prices rise, trading volume tends to increase. As the number of lions expecting a rise in stock prices increases, transactions increase. The increase in trading volume stimulates new lion forces and encourages further rise.
Conversely, a drop in stock price is accompanied by a decrease in trading. As the selling force, which is skeptical about a further rise or fear of a decline, becomes stronger, it overwhelms the lion’s power. As a result, trading volume decreases. A decrease in trading volume also attracts new sellers and causes a further decline in stock prices. In this way, the stock price movement can be predicted at the trading level.
The correlation between trading volume and stock price is that when trading increases, the stock price rises. Then, when the stock price approaches the ceiling, trading tends to decrease even when the stock price rises. Conversely, if the increasing number of transactions starts to decrease, the stock price can be expected to decline. When the stock price continues to fall and approaches the bottom, trading tends to increase. Trading volume indicators include OBV and VR.
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□ OBV(On Balance Volume)
It is a technique developed by Joseph Granville as a method of analyzing stock prices through volume analysis on the premise that trading volume always precedes stock prices.
The OBV indicator is useful for determining whether a market is in a state of accumulation or divergence. In particular, it is often used to predict market changes when stock prices are stagnant.
In a bull market when stock prices rise, trading increases. Therefore, the peak of OBV is higher than the previous peak. In a bear market where stock prices are falling, when trading decreases, the OBV falls and makes a lower low than the previous point. The rise of OBV has a strong lion’s share, and the market is in a state of accumulation. If it goes down, the selling force prevails, creating a diversification state.
□ OBV(On Balance Volume) curve
A basic buy signal by OBV is when the Up mark appears. The Down mark becomes a sell signal. In addition, when an Up mark appears for the first time on an uptrend line or when the OBV line is supported after a Down mark, it is considered a buy. During a downtrend, when a Down mark appears for the first time or when support is received after an Up mark, it is considered a sell signal.
It is a technique developed by Joseph Granville as a method of analyzing stock prices through volume analysis on the premise that trading volume always precedes stock prices. It is a cumulative tally and tabulation of the trading volume on the day of the rise and the trading volume on the day of the fall. An increase in OBV can be seen as a steady and active accumulation activity, and a decrease in OBV can be seen as a dispersion. If the OBV increases along with the stock price rise, it can be judged that the stock price continues to rise. However, if the OBV decreases despite the stock price rise, the buying power is gradually weakening, and the stock price rise will not last long.
□ VR (Volume Ratio), expressed as a percentage of the stock trading volume on the day the stock price rose and the trading volume on the day the stock price fell
OBV, which is the cumulative order of trading volume, differs depending on the base date setting. It has a flaw that cannot be compared with the past. VR is an indicator that has emerged to compensate for these shortcomings. VR is the ratio of the sum of trading volume on days when the stock price rises to the sum of trading volume on days when the stock price declines over a certain period.
It is usually based on 20 days, which is one month. The way moving averages are calculated varies from day to day. If it is extremely rare, but there has been no change in the stock price, you can divide the trading volume in half and calculate it. If this ratio is 100%, the sum of the trading volume on the day the stock price rose is equal to the sum of the trading volume on the day it fell.
In general, 150% on the basis of 20 days is the normal level. The reason why 150% is the standard instead of 100% is because the trading volume on the day the stock price rose is greater than the trading volume on the day the stock price fell. In general, when this ratio exceeds 450%, it is considered a short-term overheat and a sell signal. A drop below 70% is a buy signal. This ratio is known to be a useful indicator at the bottom rather than at the zenith.
□ Turnover Ratio (去來量回轉率)
It indicates how much the number of listed stocks rotates during a certain period of time, and is an indicator to find out the distribution level of the stock market along with the market capitalization turnover rate. Since it is calculated based on the trading volume of listed stocks, it is also called listed stock turnover.
Trading volume turnover = (Today’s trading volume / number of listed stocks) * 100
The trading volume turnover ratio is a percentage obtained by dividing the trading volume by the number of shares listed. It indicates how much the owner of a stock has changed. The turnover rate of trading volume is divided into the turnover rate of individual stocks and the turnover rate of the entire market.
The volume of transactions during the day is sometimes used, but the cumulative volume of transactions such as weekly, monthly, quarterly, and yearly is mainly used. The high turnover rate means that there are active hand changes and there are many transactions, so it is popular.
In general, the annual concept is used when calculating the transaction turnover of individual stocks. The trading volume is multiplied by the number of days the market is open and divided by the number of shares listed. If it is above 100%, it is regarded as a sell signal due to overheating, and if it is below 20%, it is regarded as a stagnation and identified as a buy signal.
