It's All About Volume, or Not

Throughout my trading career, it's no doubt that volume is the most basic yet the most elusive indicator.  Aside from price itself, the only other thing that is always present in any chart is volume.  Yet, I have the hardest time mastering the interpretation of volume in the context of price action.

We've all heard the trading adage, "volume proceeds price."  But which volume bar really matters?  Which volume bars still matter?  What is considered heavy volume?  Relative to what - previous bar, the average volume, or previous big volume bar?  Does volume matter in an intraday chart?  When does a big volume bar indicate exhaustion?  Does volume analyses work on lower priced stocks?

As shown above (from: source), we want to see a trend continuation with increasing volume, thereby confirming the primary trend.  But at some point, as suggested by another rule of thumb, "a surge in volume can often signify the end of a trend"?  So when do we "flip" the volume interpretation?  The following chart was the example used.

One indisputable concept regarding volume is when a break-out of is confirmed by heavy volume.  There is no argument there.  It's bullish, period.

But what if there is no volume confirmation on the break-out?  Price can still rally for a long time with low volume.  So what do we do?  I posted the VZ chart the other day.   There was a massive selling volume at the end of March that defined the epic level of resistance.  But look what happened:  it was taken out like a knife through a carrot cake -- without a fight, on only average volume.  And it has rallied 10% since!   The only take away is this:  just because there is no volume confirmation, it doesn't mean you should fade the price.

Another common application of volume is on double bottoms (or tops).  Assuming the first bottom is accompanied by heavy volume. After a rebound, if the second attempt to make a new low has diminished volume compared to the first, then we could expect a reversal soon.  See the SPY daily chart below.

Everything else about volume is too nebulous, elusive, subjective or whatever word you want to use to describe it.  It's an art.  As such, I find volume as a trading tool quite unusable.  Thank you very much.  It often serves as a noise to confuse me in trading -- that is, until one day perhaps when I finally "get" it!!  If you have any insights, please do post comments!