Head and Shoulders Pattern Lets set an example in order to visualize this more easily.
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- Head and Shoulders Pattern This is an important point to remember because it will help answer many of the questions you may have about how support and resistance work and why do they matter.
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We have the price aspect, but it make money on the Internet for beginners verified site tell us if were looking a trend reversal or a random fluctuation at the given time.
For a more relevant conclusion, we should look at the volume of the asset for the same day.
If the volume is higher than average, then this might very well mean that we are looking at a trend reversal remember volumes and levels of binary options technical analysis isnt an exact science, which means that this is not conclusive; its telling us what we might be looking at but we are still working with possibilities.
However, if the volume is lower, then its probably not a trend reversal at all. Volume should generally go the same direction as the trend.
How to measure volume?
If prices are rising, then so should the volume, and vice versa. Volume can also be used to determine a trends stability.
In the cases where the two values correspond and have the same direction, then we are talking about a stable trend. However, if the price and volume start moving in different direction, this may be a sign that we are talking about a weakening in the trend.
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In the cases when price and volume tell different stories, we are talking about a divergence. This is a phenomenon described as a discrepancy between two different indices in this case price and volume.
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Volume and Chart Patterns Volume can also be used to confirm chart patterns. We will describe the confirmation process in more detail once we talk about the different patterns, such as head and shoulders, triangles and flags. Volume is the aspect that helps us determine the accuracy and strength of a pattern.
Volume Precedes Price Volume can also give us a basic idea about the future price movements of an asset.
If the volume is decreasing, then the price will probably decrease, as well, even if there is an uptrend at the current moment. This is a very important point for various reasons, the most important one being that it can actually help us with price predictions and can give us the idea of when its the right time to buy and the right time to sell.
This is an overall important aspect of technical analysis and will help us in our further studies of the this splendid activity called trading. The better your understanding of the basic concepts is, the better you will be able to grasp the overall concept, the ideas that tie the whole venture together, the immense opportunities related to trading.
In the end, all of this is crucial for your understanding of the market and the modern economic mechanics. Now that weve covered some of the basics, its time to move on to something a bit more complicated — charts.
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