Trading)VPA, Trading Volume: The Only Window for Retail Investors to Peek Inside the Market (Chapter 2)
Volume is the only tool retail traders have to peek inside the market. While price alone doesn’t reveal the true strength of a move, volume helps assess whether a price increase or decrease is sustainable. By analyzing volume, traders can better understand market trends and spot when smart money is entering or leaving, providing a crucial edge in decision-making. Why Volume? The chapter opens with a quote from Warren Buffett: “The key is having more information than the other guy – then analyzing it right and using it rationally.” To illustrate how markets work, the author shares a fictional story: The Parable of Uncle Joe . Uncle Joe’s Story Uncle Joe runs a government-licensed company that is the only supplier of a product called widgets. Though the product has real value and doesn't degrade, business is boring—sales are slow, and profits are small. To boost sales, Uncle Joe spreads a subtle rumor through a gossiping neighbor: widgets might soon be in short supply. As expected...