How Dennis Uses Stock Trading Volume in Investing...

[Dennis Ng]

for me, Trading Volume is something I will use as a guide.

The following is how I use Trading Volume as a guide to stock investing:
1. Low Trading Volume typically signify that a stock is not discovered yet. For example, when I bought Pokka a few years ago, price was stable at about S$0.30 and volume remained very low for as long as 2 years...during such times are typically times when "accumulation" is going on. ie. some syndicates or invisible hands are "collecting" the stock. And I would collect some stock as well if after research I find the shares "under-valued". The low trading volume is a necessary evil, which I don't mind since I'm in no hurry to sell the stock at all.

2. After a stock crashed, I would wait for trading volume to decrease and possibly price to stabilise before buying. Why? Becos low trading volume might signify that most of those who want to sell already sold, that's how a stock might actually bottom. I will wait for the price to stabilise as well.

This is why I bought FSL after it dropped to S$0.36 and moved back to S$0.38, instead of buying at S$0.36. I also saw that selling volume seems to get lower as the price get lower.

3. Any stock that made a new high in price and volume, thereafter the price come down a bit but volume remained very high, typically might signify to me that "Distribution" is on-going ie. syndicates are selling their shares to let retail investors to come in to hold their "baby"...

Thus, typically there is still time to get out of the stock as the price would only drop a little bit and volume still remain high as distribution is on-going.

Above is based on learning from others and also years of observation of the markets, NO fanciful theory to back up what I said.