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Volume Spike
Enter positions when unusual volume is detected
Intermediateplay_arrowTry in Backtesting
What Is This Strategy?
Volume spikes often precede significant price moves. This strategy identifies when volume is abnormally high (measured by standard deviations from average) and trades in the direction of the price move.
How It Works
- Calculate average volume over a lookback period (e.g., 20 days)
- Calculate the standard deviation of volume
- When current volume exceeds 2-3 standard deviations = Volume Spike
- If price is up on high volume = Buy signal
- If price is down on high volume = Sell/short signal
Key Parameters
Lookback Period
Days to calculate average volume
Threshold
Standard deviations for spike
Min Volume
Minimum volume filter
When to Use
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Best For
- • Earnings announcements
- • News-driven moves
- • Breakout confirmation
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Avoid When
- • Low-volume stocks
- • Without price confirmation
- • Options expiration days
Risks & Limitations
warning
Be Aware
- • Volume spike without price follow-through may reverse
- • False signals from one-time block trades
- • Needs price direction confirmation
Example Trade
Scenario
GOOGL volume is 4x normal with price up 3% at market open.
BUY
Reasoning
Massive institutional buying indicated. Strong conviction behind the move.
Ready to Test This Strategy?
Backtest this strategy on historical data to see how it would have performed.
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