Volume and Liquidity can determine your gain in Trading

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Volume and Liquidity can determine your gain in trading

As you are a trader you should focus on many things which can lead you to a great profit. Trading volume is an essential factor among them. Did you ever notice how it influences in your trading? If you make an analysis you will get a clear idea about it.

The volume measures the amount of transactions (buying and selling) that is being done. So trading volume is an important factor in trading that you should follow. Above all trading volume reflects the amount of shares or contracts that are being traded on the asset for the given period of time. If you need to determine the amount of activity in the asset you have to focus on the trading volumes. When there is high curiosity in a financial asset, the trading volume is of course high. If the trading volume is low for an asset, then the instrument is not traded actively. While trading volume determines the amount of transaction another factor is also arise with it, which is liquidity. Liquidity tells you to how easy it is to buy or sell an asset without affecting the price of the asset. Therefore along with volume, liquidity is also an important aspect in day trading. The stocks which have more liquidity, can give you the better chances to make reasonable gains, even if it means scalping the markets for just a few ticks or points.

You should have a clear idea about volume and liquidity. Obviously it will improve your trading profits and puts you one step closer to financial freedom. Volume is directly proportional to liquidity i.e., High Volume Means High Liquidity. Stocks with a high volume are very liquid, not to reveal that they have lesser spreads between the bid and ask prices. You can’t predict anything in such conditions. Then a question will arise in your mind “how can you make a move in high liquidity stocks?”

Here we reveal the importance of technical analysis because only the technical analysis can work better on liquid stocks along with the volatile trends. Technical analysis can give more data which makes you able to take decision. Technical analysis mainly works on the basis of demand and supply study, past prices and volume in the market and future price trend direction.

Knowledge of technical analysis is a skill that any investor can use to make better investments in the stock market. Technical analysis is done on the basis of a number of charts and other available tools that help you to make future activity chart in the investment market.

Did you get the importance of volume and liquidity in trading? The only way to make it easy is to take a good support of technical analysis. If you can make the move with the trade volume and liquidity you will be in the path of success with minimum risk and you can make a stress free trading also.

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