Volume (tumover) is simply the number of futures contracts traded during each trading session.

A
contract is consummated only when both sides of the trade agree to the price and quantity. At the
end of a trading session, the total number of contracts bought equals the total number of contracts
sold. Therefore the following equality always prevails: Buy volume = SeIl volume = Total volume
Published volume figures represent one side only. The phrase "more buyers than seIlers" (or vice
versa) is never true with respect to volume (or open interest) statistics. A more representative
phrase to explain the rise in prices during a partieular trading session might be "more potential
buyers than seIlers." For exarnple, if total volume (in all months) of deutschemark futures on the
IMM was 35,000, what would that mean? It means that 35,000 eontraets were bought, which equals
the 35,000 eontraets sold, and this is the 35,000 total eontraet figure that is reported-one side only.
Each contract represents 125,000 DM. If an extended result is desired, the number of trades is
simply multiplied by the contract size. SIGNIFICANCE OF VOLUME Volume is a measure of urgeney. It
is the result of the need for traders and investors to "do something," and nothing creates more
urgency in a market than a losing position. Since any useful chart analysis determines what the
losers are doing, the technician will want to monitor this sense of urgency (Le., volume), thereby
assessing the health and strength of the prevailing price trend (up, down, or sideways). 3

4 CHAPTER2

The specific volume number is not important. It is necessary to elassify the trading session's volume
into one of three categories: low, average, or high. A discussion of how to determine these
parameters is found in Cbapter 6. The following sections in this chapter explore the relationship
between price and volume. This analysis will demonstrate the importance of volume interpretation
in formulating successful trading strategies.

IDEAL HEALTHY PRICE UPTREND The ideal situation for a healthy bull market occurs when volume
moves up as the bull market expands. A strong price uptrend is characterized by greater volume on
days when prices elose higher than on days when prices settle lower. Specifically: Price up - Volume
up Price down - Volume down Prices do not continually go up every trading session-even in the most
bullish environment. There are always adverse price moves (seil-offs) against the direction of the
major trend. Much can be learned about the overall health of the buB market by monitoring volume
on these periodic and inevitable seil-offs. If there was no urgency created in a market on a price seil-
off, what type of