Often, we are seduced into buying the latest wing ding newsletter that promises us high profit potential by trading the volume indicator on a chart. The thinking is that, if volume is high the stock price will go up and if volume is low, stock price will fall.
Well, it’s an interesting trick if you can believe it.
But, if I were you, I wouldn’t go out and spend a dime let alone thousands of dollars on expensive newsletters that offer only pie in the sky. Instead, I’d take that money and put it into an options trading account and learn what really makes prices move.
In fact, you don’t even need to have an account if you follow the research team at tastytrade.com. Their daily research is free and always up to date.
Today, prior to the opening bell, Tom and Tony presented a research piece that discussed the correlation between volume and price for a few of the largest names traded daily; namely SPY, AAPL, TSLA, and NFLX.
The research showed there is virtually zero correlation between the volume traded and the price movement of the underlying security. Another myth debunked!
This isn’t to say that volume isn’t important. Volume is very important when it comes to trading stocks that have very liquid options. We’ve discussed this before, and it is one of the primary metrics we use in determining which stocks to focus on in our option trading activity.
If Dividend paying stocks is your thing, check out the following link for stocks that could fit into your options trading portfolio.
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