99% of traders look at volume...

yet the majority of traders are using it WRONG

Here's how I used volume to make 6 figures trading last year:🧵

We all know the classic volume tips that we were told in the penny stock era...

Wait for a run up, then look for a pullback on LOW volume to get an entry

This isn't how you should be looking at volume...
First, let's start with what do I mean by volume

Volume Profile?

# of shares?

No.

I look at the volume BARS
The key is to look at relative volume compared to the previous candle bars

Low volume bars don't matter

The secret is in the high volume bars
Why?

Because high volume bars indicate REVERSALS (in most cases)

Take a look at $SPY

Notice the volume on each bottom?
Not every bottom or top will have high relative volume

However it's another element that can be used in your strategy for confirmation
Here's an example of $TSLA

Aside from the open (which will always have high volume)...

The highest volume bar on the 5min timeframe for the last hour was an intraday high!
Here's another example on $FB

Notice the high volume?

Was the low of the week...
But like I said, high volume doesn't mean a reversal is coming 100% of the time

Here's how you confirm👇
The key to confirmation is simply waiting.

Wait and see what the following next few candles do

Does price immediately reverse?

Does it consolidate?

Continue pushing?
Look at the next few candles to confirm if a reversal is coming

Here's one key thing I noticed about volume as well👇
If you see a huge volume candle and price keeps squeezing right through with no signs of a reversal...

It usually means price will continue squeezing

Why?

Shorts immediately got ran over and now have to cover, pushing price even higher
It's important however that you only use volume in terms with your strategy

Don't use volume as a sole indicator to get in or out of a trade

Have a strategy and test to see if adding volume will help it or hurt it.
If you learned something from this thread, feel free to leave a like + RT the original tweet so others can learn too

I’m writing a thread everyday in June 👀

So follow me @FT__Trading if you’re interested in trading strategies and psychology

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