Price moves can sometimes be lackadaisical. There is no sense of purpose; Price seems to be blowing in the wind or falling under its own weight. Price can be in the car, engine running, the light is green, but no sense of urgency to go anywhere. I usually loose money in these times. Price will eventually sink to the level of my protective stop and Bam! I'm out. Then for no real reason, it floats to a higher level, without me. I am stuck with another loss and feeling bad that I missed an opportunity. I could almost feel lunch money between the folds of my tattered wallet but profits eluded me.
Volume is what I think of as a conviction indicator. When a lot of people are loading up on a stock, the volume goes up. when there are more buyers than sellers, shares become more precious and price rises. When price rises, I am closer to having enough money to buy lunch.
Now here is the beautiful thing: When sidelined traders see Price and Volume increases, they become interested. They may watch for a while and when convinced, they jump on board. The more more shares that they buy, the more volume increases. Think snowball effect here; With more buyers, the shares become more precious. Now, my lunch money is guaranteed. The thing is that lunch might be delayed. I am not interested in selling because I wouldn't want to prematurely end my winning streak.
Since nobody either wants to buy more shares, or sell current positions, Volume declines.
Eventually, I do get hungry enough that I have to cash out and make other purchases with my profits. When I do, others begin to see Volume increases and re-consider their positions. They might want to lock in profits as well. Volume begins to increase as more and more shares are sold. More sellers than buyers results in falling Prices.
At this point, we probably haven't mastered the topic but the discussion goes a long way towards understanding Market Tao.
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