📍 Core Concept

Volume Confirmation

Using volume to validate price movements and patterns.

APOLLO ENCYCLOPEDIA

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What It Is

Volume confirmation means that volume supports the price action you're observing. It's the agreement between what price is doing and how much participation is behind the move. Without volume confirmation, price movements are unreliable.

Key insight: The simplest rule in technical analysis: volume should expand in the direction of the trend. Uptrends should have higher volume on up-days than on pullback days. Downtrends should have higher volume on down-days. When this relationship breaks, the trend is weakening.

Volume confirmation applies to everything: breakouts, candlestick patterns, support/resistance bounces, and trend continuation. It's the universal filter that separates genuine signals from noise.

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Applying Volume Confirmation

Breakout confirmation

A breakout above resistance must be accompanied by volume at least 1.5× the 20-period average. Without it, the odds of a fakeout increase significantly.

Pattern confirmation

Candlestick reversal patterns like hammers and engulfing candles are far more reliable with above-average volume. The volume shows that the reversal candle represents genuine buying/selling interest, not just a random wick.

When to ignore volume

The only time low volume is acceptable is during pullbacks within a healthy trend. Pullbacks should be on declining volume, showing that sellers are not committed. The subsequent push in the trend direction should then have volume expand again.

💡Pro Tip

Apply this concept in combination with others. No single concept tells the whole story - confluence is key.

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