Could someone please help me with low volume tests. I'm confused about two things, as hopefully highlighted by the image included.
The first problem I have is that areas where people say low volume is good, I'm thinking is a previous level of resistance being tested now as support and that we wanna see high volume if it's gonna hold. Yet time and again I hear people saying that this is a "successful low volume test".
The second problem is often people refer to these as successful low volume tests as the tests are on decreasing volume, but the volume is still above average. It seems like sometimes people compare volume to the previous two bars and say it's low or high based on the recent previous action. At other times I've heard people say that the volume even though it's lower than previous bars is still higher than average so count it as low volume. So when you're looking at a low volume test, should you just be comparing it to the very recent action? Or the average volume?
Gah I'm really not sure I've explained this very well, but I hope someone can decipher it!
The first problem I have is that areas where people say low volume is good, I'm thinking is a previous level of resistance being tested now as support and that we wanna see high volume if it's gonna hold. Yet time and again I hear people saying that this is a "successful low volume test".
The second problem is often people refer to these as successful low volume tests as the tests are on decreasing volume, but the volume is still above average. It seems like sometimes people compare volume to the previous two bars and say it's low or high based on the recent previous action. At other times I've heard people say that the volume even though it's lower than previous bars is still higher than average so count it as low volume. So when you're looking at a low volume test, should you just be comparing it to the very recent action? Or the average volume?
Gah I'm really not sure I've explained this very well, but I hope someone can decipher it!
"Never Take a Trade You Don't Understand!" - Pres78