But between now and that distant tomorrow, the answer is supply and demand.
And the balance of those forces is not always rationally based.
It is at market-negotiated prices, not values, where we sell (and buy) stocks.
And markets reflect people, not fundamentals alone!
It is not the news itself that moves prices, but instead the response of investors and traders to that news.
To the degree that news constitutes a surprise, price will move dramatically.
The extent of changes in opinion can be measured in trading volume. That tells us the degree of surprise hitting the market and the urgency with which the affected traderss and investors feel they need to take action.
What studying volume does, in effect , is to reveal
- what the crowd is thinking and
- how big that crowd is.
Understanding the crowd's collective mind set is crucial to being on the right side of the price action.
Watching the crowd and the trading volume it creates will add a new dimension to your market and stock analysis.
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