Home > Lessons from the trading floor > Volume and the Markets … An observation…

Volume and the Markets … An observation…

Would be nice to see higher volume on an up day like today vs. the higher volume we saw on Thursday’s down day. Although the markets have held their 50ma on the daily charts, they have not bounced off these levels on high volume. That is technically a red flag that one needs to monitor before starting to increase leverage on any given day. Low volume bounces if not followed by higher volume follow through days will result in choppy markets without a clear trend. It is important to note that one of the leaders in this last market was the NASDAQ, and for the most part it failed to confirm a good buy order flow.

Low Volume pop in markets

Low Volume pop in markets

All this to really point out the fact that intraday trading using leverage needs to be used when trading is obvious, or when the trader has an edge. Without an edge a trader with too much leverage is a recipe for a disaster. We need to be ready for when the edge is re-established. We need to be ready for a sell off, defined by a break in the 50ma for now, and be careful with longs using leverage until the markets regain the uptrend by making a higher high – until then leverage needs to be use sparingly. Earnings season is starting now… so maybe this will define the order flow in the markets.

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