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Volume Spike Trading Strategy
In this article, I am going to discuss the Volume Spike Trading Strategy with Real-Time Examples. Please read our previous article where we discussed Volatility Contraction Pattern (VCP) Trading Strategy – How to Trade the Volatility Contraction Pattern with Examples.
Why Volume Matters in Trading?
- Market Interest price move on large volume shows that something might have triggered the move. This could be a news or earning or fundamental change or economic release such as the non-farm payrolls or an interest rate decision
- Momentum – Rising volume with price increasing suggests bullish strength increasing Falling volume with price increasing suggests that momentum is waning and there could be a reversal. For more details click here Volume Price Action Analysis
- Confirmation – Traders also use volume as a way to confirm chart patterns breakout or breakdown any breakout or breakdown. For more details about the breakout trading strategy.
- Climax-In a strongly established trend, large price, and volume spikes often precede a major reversal: the security has either been substantially overbought or oversold and market professionals step in and buy/sell against the trend. Check Volume Spread Analysis.
- Spike within trading range-In a trading range, large volumes on a wide-ranging day will signal the likely direction of a breakout.
What is the Volume Spike in Chat?
The high volume suggests that something happen to the instrument. may be due to news or earnings OR TECHNICAL or fundamental change or economic releases such as the non-farm payrolls or an interest rate decision or any other reason. This can cause a rush of both retail traders or investors and institutional buyers or smart money into the stock, which creates demand from both retailers and smart money and moves the price up. Align yourself with the volume spike to ride the big gains.
Identifying Volume Spike Entry
What to check after Volume Spike?
VOLUME SPIKE CAN OCCURS at
- BREAK OF MARKET STRUCTURE
- AT demand zone FOR BULLISH REVERSAL (IGNITING VOLUME)
- CLIMAX (ENDING VOLUME)
- ACCUMULATION /REACCUMULATION BREAKOUT
- Spike within the trading range. Trade direction of the breakout
These characteristics show clear INSTITUTIONAL DEMAND. One more follow-through of volume spike within 3 to 4 days confirms the move behind smart money
BELOW STOCK AFTER VOLUME SPIKE PRICE MOVE from 330 to 900 (160% up move)
Here is another example of a volume spike. Each volume spike price doubles the last volume spike 50% up
CHECK Overhead SUPPLY ZONE BEFORE LONG ENTRY
If there is a significant supply zone immediately overhead. It might be best to disregard the trade. If the supply zone is high enough above the current price to allow for a significant gain, then can take entry.
How to find it?
You can find it in 2 ways
- End of day (EOD)
- Real-time (during the day)
End of day (EOD)
Here are the main things I look for:
IF MISSED THE REAL-TIME HIGHEST VOLUME ENTRY
Entry: above volume spike candle high. PART ENTRY ACCUMULATE BUY ON DIPS UNTIL VOLUME BREAKOUT CANDLE LOW BREACH
Exit: end-of-day close below the volume spike candle low.
Basic Criteria I am using for Finding Volume Spike
- Highest volume ever or in a year or since IPO day o
- Volume spike day close > vwap of that day
- Best if there is follow on follow through volume within a couple of days after the volume spike day
Scanner for the above criteria
Below are some examples of volume spike trading
Price reaches the demand zone by making a falling wedge pattern. Then trendline breakout with a volume spike in 6 months price doubled from there
The below example shows Spice in the reaccumulation stage.
Volume spike breakout and confirm the move behind smart money
In order to be alerted in real-time to the volume spike signal, you need to choose a real-time scanning and alert Logic of volume spike intraday trading
What happens is some kind of significant catalyst occurs in the instrument. This can cause a rush of both retail traders or investors and institutional buyers or smart money into the stock, which creates demand from both retailers and smart money and moves the price up. Align yourself with the volume spike to ride the big gains.
In the next article, I am going to discuss Fibonacci Trading Strategy – Complete Tutorial with Real-Time Examples. Here, in this article, I try to explain, Volume Spike Trading Strategy with Real-Time Examples. I hope you enjoy this Volume Spike Trading Strategy article. Please join my Telegram Channel and YouTube Channel as well as my Facebook Group to learn more and clear your doubts. Please watch the following video if you want to learn and understand this concept in a better way.