Volume Divergence Analysis

Volume divergence occurs when the price of an asset makes a new high or low, but the volume associated with that move is lower than previous moves. This indicates that the trend is losing steam and that there is a lack of conviction behind the current price action.

In derivatives trading, this is a powerful signal that a reversal or a period of consolidation is imminent. It suggests that the buying or selling pressure is exhausting itself.

By combining price action with volume data, traders can spot these discrepancies early. It is a fundamental tool for identifying turning points in a trend and avoiding trades that are likely to fail due to lack of follow-through.