Markets go up and markets go down. That is their nature. Swing trading seeks to take advantage of trading opportunities that present themselves when markets have succumbed to human weakness and have ventured to far from true value. Greed is the catalyst to bull markets where the ownership of assets is prioritized over all else; even common sense. At times such as these, growth expectations into the future will be unrealistic, and so capitalization will result in capital investment values that are far higher than they reasonably should be; their expected returns into the future are incorrect. Similarly, fear is the catalyst to bear markets when traders are so pessimistic about investment that they seek to extract their capital and divest themselves of assets. Often this is in response to a threat to the investments future prosperity. At these times the fear of capital loss and the panic to recoup whatever is possible leads to major downward plunges; assets often collapse in price quicker than they appreciate. Particularly when asset prices have experienced serious depression, markets can remain in a stupor while investment confidence seeks to regain its base. Swing traders preempt a markets imminent reversion from excesses such as these to fair value.

Of course to come to a reasonable decision that price is illusory and value is to be had, the swing trader relies on a quiver of tools to confirm and reconfirm his jaunts toward profit. Primarily the swing trader, while amiable to entering the market on both sides, is not looking to predict the tops and bottoms of the markets but moreover to successfully predict the substantial movement within a trends origin and termination. Swing trading is therefore relatively short term in purview, but will primarily look for indicators to dictate the duration of the trade.

Often indicators such as the Moving Average are employed to assist swing traders. They are extended into complex analysis through the EMA and MACD index but continue to hold the same universal theory: consecutive opening and closing prices that are perpetuating in one direction consist of a trend. Ranges however are a far smaller level of abstraction and so do not have the fullness of time in their favor. This being the case, a large trading range with a closing price at the same level of that day's opening indicates substantial indecision in the market; neither buyers nor sellers have been able to influence price. Particularly after an extended period of trending this is indicative clarity to the view that the trend has met its end. Significant leaps in trading volumes will only further this cause.

Markets are able to fluctuate somewhat freely on light trading volume as prices are pushed around by one or two big orders on a quiet trading day. Yet when trading volumes show a significant increase from the norm, this indicates substantial market interest. Here, buyers and sellers of varying points of view are increasingly interested in divesting each other of their respective positions.

While 80% of all trading activity has been found to be stop loss oriented, this alarming fact points to the variety of motivations that market participants adopt to investment decisions. Some are long term some short term; some are taking profits, some losses. Amid the confusion, one thing can be certain. When trading volume experiences a sharp increase – a dramatic market shift is imminent as the price has motivated substantial participants to become involved in decision making. At the end of a prevailing trend, volume will increase markedly, and so the market confirms this by participation. Rarely would this occur mid-trend as by definition a trend needs urgency of either supply or demand to outweigh one the in order to maintain its course.

Proponents of other indications such as technical analysis’ support and resistance, momentum’s MACD index, and mathematics’ Fibonacci numbers will all seek confirmation with an increase in trading volume prior to extending a signal. Primarily as the market needs to be supporting or rejecting a certain price, the absence of volume can hardly suggest that is the case. Indeed dwindling volumes are more an indication that the trend has met a natural end and that a retracement is imminent. A retraction in trading volume indicates that momentum is slowing and will find much profit taking entering the market, which will itself perpetuate movement back to true value.

In this sense, volume is rarely an indicator applied in isolation and is keenly attuned to other indicators and in particular, momentum. Still volume must be adjudged with relative comparison as some markets have typical volumes that would astound others. Volume ought never to be ignored as it indicates the bastion of trading activity – participation.