The reason behind the price-volume relationship

Price-Volume relationship refers to the intrinsic relationship between the volume of a stock and the price increase or decrease. Generally there are two kinds of relationship: synchronization and deviation.

Volume refers to the volume of a stock in a certain period of time; price refers to the price of a stock, generally based on the closing price, and will be supplemented by other prices to judge.

Investors can analyze this relationship to judge the situation and trade stocks.

1. Volume increase price rise
Volume and share price rise synchronously, only in the rising market, and most of them appear in the early stage of the rising market. After a longer round of decline and bottom consolidation, the market gradually saw many positive factors. These positive factors enhance the market expectation of good psychology, changing hands gradually active. With the enlargement of volume and the parallel rise of share prices, buying shares can be profitable in the short term.


2. Volume contraction price decline
Volume reduction of individual shares also fell in step. Volume shrinkage phenomenon may appear both in the middle of the down market,and the middle of the up market. Down market volume shrinkage price drop indicates that investors in the shipments no longer do "short covering", the stock price will maintain the decline, investors should be held to wait and see.

1. Volume increase and price leveling
Volume increase stock price to maintain a certain price level up and down, volume increase price level may appear in the various stages of the rising market, may also appear in the various stages of the falling market. If the stock price is in a low price area after a long period of decline, the volume began to increase, but the stock price did not rise simultaneously, this trend may indicate that there are new funds in the pressure to build positions. Once the stock price turns upward on volume, it indicates that a bottom has formed.

2. Volume increase prices fall
Volume increase stock prices instead of falling. The phenomenon of volume increase prices fall mostly in the early part of the down market, there are also a small part of the early part of the up market. At the beginning of the down market, the stock price after a period of large rise, the market's profit-taking chips more and more, investors have to throw out the stock, resulting in the stock price beginning to fall. This high volume price decline phenomenon is the signal to sell.

3. Volume contraction price rise
Volume contraction price rise (volume reduction in the stock price but up), volume contraction price rise more appear in the end of the rising market, occasionally also appear in the rebound process of the falling market. In the sustained upward market, a moderate amount of shrinkage price rise indicates a high degree of control of the main force, a large number of chips in circulation by the main force lock. But after all, the volume shrinkage price rise shows a trend of volume divergence, therefore, in the subsequent upward process, if the volume of the situation again, may mean that the main force in the high level of shipments.

It is worth noting: price-volume relationship is not a point in time, but a period of analysis of the cycle.

Volume and price go in the same direction: the stock price rises, the volume also rises with it, is the market continues to be bullish performance; stock price falls, the volume decreases with it, indicating that the sellers are bullish on the market, hold positions and wait and see. The rebound is still very promising.

Volume divergence: the stock price rises while the volume decreases or is flat, indicating that the rising trend of the stock price is not supported by the volume. This rising trend is difficult to maintain; the stock price falls but the volume rises,which is a precursor of the downturn, indicating that investors panic about selling.