Updated: Apr 28
Imagine you look in the future and know how much volume will be traded by a certain time.
Will your trade exits improve, if you knew a squeeze or a breakdown is coming?
Is it even possible?
How does it work?
Since human behaviour is predictable, the volume also becomes predictable. Volume drives the price direction.
Daily chart of $ARDS on 27-Jan-2022
On 27-Jan-2022, $ARDS started running. It also ran in Dec 2021 when 40M shares became bagholders. The previous buyers are losing money and panicking causing selling pressure.
1-min chart of $ARDS on 27-Jan-2022
The volume forecast indicator estimates that between 24-36M shares will be traded. This is less than the amount of bagholder from Dec-2021(40M). Therefore, the selling pressure is more.
You may have guessed what happens at the end of the day. It fades beautifully which makes it a perfect short.
We applied this strategy to more than 642,131 trades.
In small-caps, forecasting volume helps you know the trend by estimating how much volume will be traded in the future. If the stock trades more volume than forecasted, the price squeezes. If it trades less, the price fades.