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The volume of trading on a stock is considered one of the useful indicators for speculators and investors alike to ascertain the nature of the liquidity entering and leaving the stock during the ups and downs price movements. There are different uses for the trading volume of the investors, but the most prominent of them explain its use to confirm the direction of the stock price, up and down.

The basic rule of trading volume

The basic rule of trading volume as a confirmatory indicator appears in the upward path in the form of a noticeable increase in trading volume with each rising peak (achieving a new high price) and its decrease with every rising bottom (correction), while in the downward path it occurs in the opposite direction, as you notice an increase in trading volume with Each lower low (making a new low) and its low with each lower high (retracement).

How does rotation appear?

When we talk about the concept of rotation, we do not mean the normal speculation process that takes place on shares, whether in the Saudi stock market or international markets, but we refer here to the market-making processes that can occur irregularly. For example, when you look at the stock of the fish company, you will find that the basic rule applies somewhat to the upward path, but the trading volume did not exceed the level of 21 million shares at the beginning of the second week of July, which means that there are indications of the existence of a market-making process taking place on the stock. .

Are there licensed market makers in the Saudi stock market?

A trading company announced on its website during the month of January 2018 AD the application of the market maker model, but there is no clear information on the company’s website about the members of the market who do so, as the directory of market members lists the names of licensed companies, their contact information and addresses only, but it does not explain the exact role of each member. (See the New York Stock Exchange Market Members Directory)

Could the spinning behavior happen in the US market?

It is possible to notice behaviors similar to rotation in the American market in different stocks, but if it occurs, it is often due to the presence of licensed market makers who contribute to providing liquidity to speculators, and it is often temporary (various periods) as it is supposed to help regulated market makers (Regulators) to control Manipulating stock prices according to the regulations governing this. To learn more about how market makers work, you can read the following topic (Who are market makers)