Volume Analysis A Key Checklist for Successful Stock Trading

Revisiting the checklist

Let’s review the checklist from a volume standpoint and consider this hypothetical technical scenario in terms of stock.

  1. A bullish engulfing pattern has occurred, signalling a potential long trade due to the factors previously mentioned.


  1. A bullish engulfing pattern at a support level implies strong demand for the stock, providing an opportunity for the trader to buy.


  1. With a recognizable candlestick pattern and support near the stop loss, the trader gets a double confirmation to go long.

When you take into consideration the backing around the bottom and there being high volumes on the second day of a bullish engulfing pattern, i.e. P2 (blue candle), it is possible to draw some conclusions.

It is unmistakable that the large market players are trying to buy the stock, evidenced by the significant activity and rising prices.

By looking at candlesticks, support and resistance levels, as well as trading volume, it is evident that all indications point toward taking a long position. This trifecta of signals makes this decision highly likely to be successful.

The fact that volumes are compelling is one that should not be overlooked; it provides the trader with confirmation of trade and thus plays an essential role in any checklist.

This checklist has been revised, and here’s what it looks like.

  1. The stock needs to create a recognizable candlestick shape.


  1. S&R should ensure that the trade is confirmed and confirm the stop loss price at a level close to S&R.


  1. For a long trade, the low of the pattern should be around the support


  1. For a brief trade, the peak of the pattern should approximately coincide with resistance.


  1. Volumes must comply with the trade.


  1. There was a notable amount of activity on both buy and sell days.


  1. Volumes are not promising, so it’s understandable if you don’t feel comfortable entering a trade with low volumes.