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The Importance of Studying Trading Volume:
An Example of Volume Analysis in Action.

Following is a practical example of volume analysis in action – it illustrates the relationship between spikes in the Volume Moving Average (VMA) and index reversal points.

Above, we have provided a mid-term example of the relationship between index values and volume, more specifically - the Volume Moving Average (VMA). A surge or spike in the VMA subsequently affects the movement of the index, frequently leading it to reverse its previous course. You can see that almost every time the VMA peaks, the index reacts with a reversal – sometimes immediately, sometimes with a certain delay. By simply being aware of them, you can trade such price-volume patterns profitably.

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