Stop just looking at K-lines! Learn to read trading volume to help you identify the main force in 3 minutes

Everybody, it's Monday again, the US stock market is closed, let's talk about technical analysis that many friends are concerned about. The most basic thing is to look at the K-line chart, judge the price trend to see if it's in an upward or downward channel, and identify basic support and resistance levels from the chart—these are fundamental operations. But today, we’re going to discuss how many people fall into the misconception of only looking at price and ignoring volume, when in fact, trading volume often hides a lot of key information. Many people misjudge stock price trends because they fail to consider the combination of volume and price. So today, we’ll go into detail about how to analyze trading volume and how to identify so-called "main capital."

1. Stable Trends Require Synchronized Volume and Price

The most stable market trends are always characterized by rising prices with increasing volume and falling prices with decreasing volume. The logic behind this is simple.

If the stock price rises while trading volume expands, it means there’s enough active buying to support the upward movement—this is a genuine trend, and major players are likely entering the market to push prices higher. Conversely, if the stock price falls while trading volume shrinks, it means fewer people are willing to follow the selling trend, and selling pressure is diminishing. This could be a signal that the decline is losing momentum, likely just a temporary adjustment.

Take an ideal scenario as an example: Suppose a stock rises from $10 to $12, with daily trading volume increasing by more than 30% compared to before. This is a healthy uptrend. If the stock price retraces from $12 while trading volume gradually decreases, with daily turnover shrinking, it means holders are unwilling to sell at a loss, and the stock may rise again after the adjustment is complete.

2. Beware of Volume-Price Divergence

More critical than synchronized trends is recognizing the risks of volume-price divergence, which are often bad signals. There are two common types: high volume with stagnant prices and rising prices with shrinking volume.

First, let’s talk about high volume with stagnant prices—when the stock price barely rises or even dips slightly, but trading volume suddenly spikes. This is easy to understand: if there’s so much trading activity pushing the stock but the price isn’t moving up, it’s possible that someone is using the opportunity to offload shares, propping up the price with buy orders while secretly selling. If you jump in at this point, you might end up holding the bag.

Next, rising prices with shrinking volume may seem like an uptrend, but it’s actually unsustainable because there’s no follow-up buying. If we consider the role of "main capital," this could mean someone is using small amounts of money to artificially inflate the price, luring retail investors to chase the rally while quietly exiting.

3. Daily Charts for Short-Term, Weekly Charts for Trends

Additionally, interpreting trading volume depends on the time frame you’re looking at. Volume-price signals have different implications in different time frames.

Daily charts are suitable for short-term fluctuations, such as movements over 1-3 days. Rising prices with increasing volume on a daily chart might just reflect short-term speculation, with weak sustainability.

Weekly charts are better for identifying medium- to long-term trends, offering higher reliability. If a weekly chart shows rising prices with increasing volume—for example, over 2-3 consecutive weeks with expanding weekly turnover—it suggests a positive long-term trend, with capital being deployed for long-term positioning rather than short-term speculation. Conversely, high volume with stagnant prices on a weekly chart indicates accumulating long-term risks.

Finally, a word of caution: trading volume isn’t everything—it shouldn’t be analyzed in isolation. While I’ve fully considered "human factors" (as everyone knows, dddd), the stock market has its own fundamental logic. Analysis must also account for broader market conditions, industry headwinds, and company-specific factors. For instance, when the overall market is declining, even the best volume-price signals may fail. If an industry faces problems, rising prices with increasing volume might just be a short-term rebound.

To help you remember, here’s a little mantra: Follow synchronized trends, flee from divergence signals, use daily charts for short-term moves, and weekly charts for long-term direction. Keep this logic in mind, accumulate experience over time, and combine it with real-world observations. May you all avoid traps and find truly capital-backed trends.