Yes, you can make money in the stock market by learning what the important signposts are. Your question is a good one, and we will go into detail in more Subscriber Questions over the next few weeks. Basically what you are looking at is the amount of stock that is for sale versus that amount that buyers want to buy. The size is the amount of stock that is being offered or bid as a particular price. The ‘best’ price from each is ast the stop of the list on a market depth screen along with the size for each price. The action occurs quickly, and it takes quite a bit of observation to finally get a feel for the ebb and flow.
The neat thing about looking at this is that it shows you if there is a lot of supply for a stock at a certain price. Lets say a stock hits the buy point but the volume is questionable; could be better but is not bad. You go over and look at the market depth (e.g., Nasdaq Level II or the like) and see a lot of supply at a price right above what your buy point. That does not happen a lot because we are looking to buy when a stock clears a resistance point, but it can always pop up. You may not wan to step in and buy right then if the volume is not there because you could move in, enjoy a small rise, and then see that supply hit the street and push the price back down. Now if the stock can recover and continue the move, then you have some strength there. If you see a lot of buyers lining up versus supply for sale, the stock could be ready for a strong move. If it has hit the buy and volume is still just so-so, we may go ahead and enter some positions on this stock even with volume not quite where we want it.