I am very new to trading and I'm just trying to do some research but I can't find an answer to my question about volume anywhere. As far as stocks are concerned in day trading, volume is the amount of trades done per candle tick, I understand. What I don't understand is whether volume is the amount of stock sold in a bear candle or the amount of stock bought in a bull candle. Or is it a mixture of both where a bear candle's volume would mean that more shares were sold than bought and a bull candle's volume would consist of more shares bought than sold.
And if it is a mixture of both sold and bought, how is it possible that there could be more sold than bought or more bought than sold? Is there a another entity other than a buyer and a seller that holds these stocks? If so, what is that?
There are always as many buyers as there are sellers, as each transaction needs a buyer and a seller. Stocks can be bought and they can be shorted. Therefore any transaction can be composed from the following
(1) somebody buying stock, somebody else selling stock
(2) somebody buying stock, sombody else selling stock short
(3) somebody buying to cover a short position, somebody else selling stock
(4) somebody buying to cover a short position, somebody else selling stock short
For stocks transactions (1) is the most frequent one.
A bull candle shows that buyers are more eager to buy as sellers are eager to sell. Buyers are willing to buy the (higher) ask via a market order, while sellers sell the ask via the limit orders sitting in the order book. This drives price up.
A bear candle shows that sellers are more eager to sell than buyers are eager to buy. Sellers are willing to sell the (lower) bid via a market order, while buyers buy the bid via the limit orders sitting in the order book. This drives price down.
Last edited by Fat Tails; April 23rd, 2012 at 10:59 AM.
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Maybe you did not see the CandleVol ChartStyle script.
This ChartStlye makes the candles various sizes that adjust with volume.
(make the 'bar width' at least 15 to make the volume changes more noticeable)
But all of this is covered in the thread Mike posted.
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Hi here is a screenshot of a 700 volume chart from the Ninja Trader platform.. You can see that the bars are different in range because of the distance price has travelled during the exchange of contracts between buyers and sellers. Hope this helps