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💧 Supply and Demand · Volume Analysis

Reading Accumulation by Volume
— Complete Guide to Supply and Demand Analysis

Prices can deceive, but volume does not lie. Volume surge and decrease patterns will be explained to identify accumulation and distribution, along with how to utilize OBV and vol_ratio.

💡 Key Takeaway — Price increase + volume increase indicates bullish confirmation, while price increase + volume decrease is a danger signal. Tracking supply and demand reveals the actions of the players.

Why Volume is Important

Volume shows how much capital is participating in the price movement. Prices can move with low volume, but when large capital (players, institutions) is involved, there will always be traces of volume. Therefore, volume is the most direct indicator to verify the authenticity of supply and demand.

Four Key Patterns

  • Price increase + volume increase — Bullish confirmation. A true rise supported by large buying pressure.
  • Price increase + volume decrease — Danger signal. A rise without supply and demand, indicating low sustainability. Potential for distribution by players.
  • Price decrease + volume increase — Panic sell or distribution by players. Confirmation of large selling pressure.
  • Price decrease + volume decrease — Natural correction. Weak selling pressure indicates potential for trend reversal.

Accumulation Patterns

A typical accumulation phase is characterized by the stock price consolidating at low prices while experiencing higher-than-average volume repeatedly. Although there appears to be no change in the stock price, it signals that shares are being steadily absorbed at low prices. After such a phase, there is often a sudden explosion in volume accompanied by a price surge.

OBV (On-Balance Volume)

OBV is an indicator that adds the volume on up days and subtracts the volume on down days. If OBV rises before the stock price (OBV bullish divergence), it signals that accumulation is in progress. If the stock price is consolidating while OBV is steadily rising, it is interpreted as a quiet accumulation pattern.

Utilizing vol_ratio

vol_ratio is the ratio of the day's volume to the average volume over the last 20 days. DawnScan considers a vol_ratio of 2.0 or higher (2x the average) as a signal of a surge in supply and demand, and assigns additional points when it coincides with a price increase. If vol_ratio is high but there is no price increase, it is interpreted as a signal of distribution by players or mixed signals.

Warning — Volume analysis is a reference indicator. Do not trade based solely on individual signals. All information is for reference only, and the responsibility for investment decisions lies with the individual.

Frequently Asked Questions

Should I buy when volume surges?

Making a buying decision based solely on a volume surge is risky. You must first confirm whether the volume surge is in an upward direction (bullish confirmation) or downward direction (panic sell). Price increase + volume increase is a bullish signal, but price decrease + volume surge could indicate distribution by players or panic selling.

How should I interpret stocks rising without volume?

Price increase + volume decrease is a danger signal. It means the price has risen without support from supply and demand, indicating a lack of buying pressure to drive further increases. After a temporary rise, there is a high possibility of a pullback, so it is safer to wait for the next opportunity accompanied by volume rather than chasing after the price.

How can I know about accumulation by volume?

A typical accumulation pattern occurs when the stock price is low and consolidating, with higher-than-average volume repeatedly occurring. OBV (On-Balance Volume) rising before the stock price is also interpreted as a signal of accumulation. Such phases are seen as the players accumulating shares at low prices.

What is vol_ratio?

vol_ratio is the value obtained by dividing the day's volume by the average volume over a recent period (e.g., 20 days). DawnScan utilizes vol_ratio to measure supply and demand intensity. A vol_ratio of 2 or higher indicates that trading has occurred at more than 2x the average, interpreted as a strong supply and demand signal, and additional points are assigned when it occurs alongside a price increase.
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OBV Accumulation Signal
Detecting accumulation through cumulative volume
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Today's Scan
Real-time check of stocks with surging vol_ratio
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RSI Relative Strength Index
Strategy combining volume and RSI

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