Understanding Time-Based vs. Volume-Based Stock Price Levels. P1

Understanding Time-Based vs. Volume-Based Stock Price Levels

Key Concepts:

Time-Based Price Level
Definition: The duration a stock spends at a specific price.
Example: A stock trades at $50 for 2 hours but with only 100 volume.
Significance: The market accepts $50 as fair value because it spends more time there. Moves away are slower.
Volume-Based Price Level
Definition: The amount of shares traded at a specific price.
Example: A stock trades at $40 for 5 minutes but with 200 volume.
Significance: $40 may be a discounted price or manipulation, depending on history.


Interpreting the Levels:
1. Fair Value (Time-Based)

• Prolonged time at a price (e.g., $50) = Market consensus on fair value.
  
• Low volume + high time = Stability; reversals are gradual.
  

2. Discounted Price (Volume-Based)

• High volume + short time = Potential discount if the price was a previous fair value.
  
• ✅ Confirmed Discount:
• Example: Milk historically fair at $1 → Drops to $1 (high volume) → Rebounds to $2.
  
• Traders recognize the discount, leading to rapid buying.
  
• ❌ Manipulation/Fakeout:
• Example: Price drops to $0.15 (no history) → High volume but weak rebound.
  

3. Manipulation/Fake-Out

• High volume at new/unfamiliar levels (e.g., $0.15) lacks conviction.
  

Practical Takeaways:
Prioritize Historical Context:
High volume + past fair value = Strong signal (e.g., $1 → $2).
Speed of Moves:
Discounted prices ($1) → Fast, high-volume rallies.
Combine Time & Volume:
Fair value = Time > Volume.
Discounts = Volume > Time.