Today we will learn about the pitfalls of trading volume

As we all know, trading volume is very important, reflecting the degree of agreement between the trading parties on the market direction, which can be used to adjust different strategies. However, there is also a "trap" in trading volume, which is that the main players use a reverse approach to buy and sell themselves, in order to deceive retail investors who are superstitious about trading volume. Let's talk about this topic today!

Trapped in one: Increase the amount of inversion

This is a common phenomenon of stock market consolidation that we often see.

The main force utilizes the inertia thinking of "quantity increases, price increases" to continuously tap into large trading volumes and create strong buying power during the upward trend, in order to attract the entry of off market follow ups and achieve their goal of seizing the opportunity to sell.

Trap 2: Taking advantage of favorable news to increase volume and rise sharply

Generally, when a stock performs well in its mid year and annual reports, as well as when there are significant positive news or themes, the main institutions are able to grasp the various positive news in advance and push up the stock price in advance.

Once the good news is realized, taking advantage of people's bullish buying trend, they often increase their volume and take the opportunity to reduce positions or sell, deceiving retail investors into falling for it.

Trap 3: Taking advantage of bearish sentiment to significantly reduce prices

In this situation, it mostly occurs when the overall stock market has been continuously declining.

Once there is negative news, the main force often adopts the effect of amplifying the negative, using large-scale strikes to suppress stock prices, deliberately creating panic level breaks or significant price drops to lure unstable retail investors to sell their stocks, in order to quickly collect chips for the main force.

When the main force conducts consolidation and liquidation after building a position, they will also adopt this technique.

Trap 4: Going against the market and increasing volume

Some stocks themselves follow the trend of the overall market and fall synchronously, or resist the market downturn and build platforms for consolidation. One day, when the market is experiencing a large volume decline and individual stocks are turning green, this stock is going against the trend and rising in volume, which is quite eye-catching. Therefore, they boldly follow up.

But I didn't expect that this stock would only have a brief one or two day market trend, and then accelerate its decline, causing many stocks to be trapped by those who followed up on the day of the surge in volume.

Trap 5: Shrinking volume leads to shallow decline

A decrease in trading volume means that selling pressure is weakening, which is a normal price volume relationship.

However, many major institutions in individual stocks that have accumulated huge gains will take advantage of investors' habitual thinking, using the method of shrinking volume and falling slowly to sell, causing investors who are trapped at high levels to have a paralyzed mentality of shrinking volume and not falling deeply, step by step falling into the trap of deep hedging.

Stock trading is not easy, it requires both policy analysis and technical analysis, as well as a game of people's hearts. I hope everyone can learn more about stocks, and I wish you all wealth and good luck!