“Watch the Trading Volume. It tells you the truth behind the price.” — Richard Wyckoff
The Market Makers’ Game
Market makers are the wholesalers of the stock market. They don’t just execute trades; they control the order books. They see the supply. They see the demand.
They also have another advantage.
Like wholesalers in any business, they set the prices.
Now, let’s be clear: no single market maker can manipulate the entire market. But when multiple market makers see the same conditions—oversupply or scarcity—they act in unison. They know how to move prices.
They use news (whether relevant or not) to justify price swings. Ever noticed how markets sometimes drop on good news and rally on bad news? That’s not an accident.
On exchanges like Nifty, Bank Nifty, Sensex, NYSE, and NASDAQ, firms like Barclays, Goldman Sachs, BlackRock and JP Morgan oversee stock trading. Their role is to ensure liquidity and make sure your order gets filled.
But their real job?
To make money. Lots of it.
And they do it by controlling volume.
Why Volume is Important in Day Trading
Volume isn’t just a number on your trading platform. It’s the footprint of market participants. It tells you where the money is flowing, who is stepping in, and when momentum is shifting. Volume precedes the price.
Day traders rely on volume price analysis for trading success because it helps them:
- Spot accumulation before a breakout
- Identify distribution before a crash
- Confirm trends and reversals
- Avoid false breakouts and traps
Big players—institutions, hedge funds, and market makers—can’t hide their movements. If they want to accumulate or distribute shares, it shows up in volume spikes, unusual activity, and price action anomalies.
Understanding why volume is important in day trading separates traders who react from those who anticipate.
The Game Never Changes
For decades, market cycles have followed the same emotional patterns—panic, euphoria, greed, fear. Institutions exploit these emotions, pushing prices higher when the public is fearful of missing out and dropping them when retail traders panic-sell.
The only way to stay ahead?
- Watch the volume.
- Follow the footprints.
- Remember—price can lie, but volume doesn’t.
Best Volume Analysis Strategies for Forex and Stock Day Trading
- Volume Breakout Strategy: A sudden spike in volume signals a strong breakout. Combining this with support and resistance levels increases accuracy.
- Price-Volume Divergence: If the price rises but volume declines, it signals weak momentum and a potential reversal.
- Climax Volume Reversals: A sudden surge in volume after a long trend often signals trend exhaustion, providing excellent reversal opportunities.
- Market Makers’ Trading Secrets Using Volume and Price Action: Market makers use volume spikes to manipulate price action. Learning to recognize fake moves can help traders avoid traps.
How to Use Volume in Trading?
Understanding volume and applying the right strategies can give traders a significant edge in forex and stock trading. The key is to analyze volume rationally and use it to anticipate market moves instead of reacting to them.
Now, the question is: How can traders use volume effectively in day trading?
Stay tuned for upcoming articles!
Master volume analysis, and you master the market.
Note: This article is part of Tradonomics’ Smart Money Secrets with Volume Price Analysis series. Explore it to unlock powerful trading insights and master Volume Price Action!