Buying after it goes quiet
Intermediate · 3 min
Three rules people use to act on ground volume, and why none of them tells you the bottom.
Spotting a quiet share is the easy part. The hard part is deciding when, if ever, to put money into it. Traders who use ground volume tend to work from three rules. None of them has been measured here, and you should read them as ways to organise a decision, not as ways to predict one.
The 20% rule
Look for three things together. Volume has been shrinking for a long stretch, with no sudden busy days. Over that same stretch the price has fallen by more than 20%. Then comes a day with even less volume than the rest. That last, quietest day is where people who follow this rule start to buy, in a small first amount.
Falling further on falling volume
Sometimes, after ground volume, the price keeps slipping while volume falls further still. Looking back at old charts, this has often been near a bottom. How long it lasts is impossible to say. That is why people who act on it buy in parts, spread over days or weeks, rather than all at once.
Volume jumps and the price rises
After a long quiet stretch, one day volume suddenly jumps and the price rises with it. This is the classic sign of a share leaving a bottom, especially one that has fallen for a long time and then gone sideways. It only counts if volume keeps rising on the days after. One loud day on its own is not a breakout. And buying here is not buying cheap. By the time the jump is visible, you are paying up to follow the move.
₹1,00,000 in three parts
- Price three months ago
- ₹250
- Price now, after a slow quiet fall
- ₹190, down 24%
- Normal volume earlier in the year
- about 4,00,000 shares a day
- Volume over the last month
- about 80,000 a day, with one day at 50,000
- The exit, decided first
- a close below ₹175
- Part 1, on the quietest day: 157 shares at ₹190
- ₹29,830
- Part 2, as it slips on falling volume: 164 shares at ₹182
- ₹29,848
- Held back for a volume jump
- about ₹40,000
- Most you lose if ₹175 breaks before part 3
- ₹3,503, about 3.5% of the stake
The exit and the size of each part were set before the first rupee went in. The last part waits for volume to jump and keep rising. If that never happens, it never gets spent, and the loss stays capped.
Try this in the app
- Research — open a share and compare today's volume with its recent weeks
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Works with
- Key points and breakouts — Some prices matter more than the rest, and a share that clears one is telling you something.
- Waiting for confirmation — A price that pokes above a key point and falls straight back has told you the opposite of what it looked like.
- How much to put in one trade — Decide what you can afford to lose first, and let that set the size.
- Stop losses — The price you decide, before you buy, at which you will admit you were wrong.
- The formula that only works backwards — A projection drawn from two past prices is a ruler, not a forecast.