List of Financial Market Terms

When using Technical Analysis, volume is essential.  Volume acts as a means of confirmation, and without the proper volume parameters in a technical price patterns the validity of said pattern is far weaker.

Let's consider a Head & Shoulders price pattern.  Volume plays a key role.  A Head & Shoulders pattern should have strong volume on the left shoulder, slightly weaker volume on the creation of the head, even weaker volume on the right shoulder, then a spike in volume on the break of the neckline.  Without these volume parameters in tact, the pattern should not be trusted.

There are several more examples as to how important volume is in relation to technical price patterns.  Bottom line, volume is key!

Open a thinkorswim by TDA account today!