Volume and sentiment indicators: reading the crowd behind a price move

Volume and sentiment indicators try to answer one question: how many people stand behind a price move, and who are they? A rise on heavy trading, across many shares, is read as stronger than a rise on thin trading in a few.

They are clues, not forecasts. In thinly traded shares, after one big block trade, or when the whole crowd already agrees, they can point the wrong way.

Volume and value traded

Volume is the number of shares that changed hands in a period. Value traded (turnover) is the money that changed hands: shares times price.

The CMT Association, which certifies technical analysts, describes technical analysis as studying patterns in market data such as price, volume and momentum. Volume is the part that tells you about participation.

Every trade has a buyer and a seller. So high volume does not mean "more buyers than sellers". It means many people disagreed strongly enough about the price to trade.

"Normal" means compared with the same share's own recent average. A busy day for a small company can be a quiet day for a large one.

Turnover matters on the EGX because share prices differ a lot. A million shares at EGP 1 is EGP 1 million; a million shares at EGP 50 is EGP 50 million.

On-Balance Volume (OBV)

OBV was developed by Joe Granville, who explained it in his 1963 book Granville's New Key to Stock Market Profits. It keeps a running total of volume with a simple rule, as StockCharts describes it:

• Close higher than the day before: add that day's volume.
• Close lower: subtract it.
• Close unchanged: OBV stays the same.

Granville's idea was that volume comes before price. A rising OBV is read as buying pressure; a falling one as selling pressure.

Worked example (example, not market data)

A made-up share over six days. The first day is the starting point, so OBV starts at 0.

The price rose from EGP 20.00 to EGP 20.80, or 4%. Up days carried 200,000 shares; down days only 50,000. OBV climbed to 150,000, so it "confirms" the rise.

Day 5's value traded was 120,000 × EGP 21.00 = EGP 2,520,000. Day 3's was 30,000 × EGP 20.30 = EGP 609,000.

The catch. Now add day 7: the price closes EGP 0.10 higher at EGP 20.90, but one block deal of 500,000 shares went through. OBV jumps to 650,000. A 10-piaster rise, from one buyer and one seller, outweighs all six days before it.

StockCharts notes that the level of OBV means nothing. Only its direction matters, and volume spikes distort it.

VWAP: the day's average price, weighted by volume

VWAP (volume-weighted average price) is the value traded divided by the shares traded, within one trading day. It resets each morning.

Example, not market data: three trades of one share in a day.

VWAP is 102,200 ÷ 5,000 = EGP 20.44. A simple average of the three prices would be EGP 20.47, but most shares traded at EGP 20.40, so VWAP sits closer to it.

VWAP was built for institutions placing large orders: buying below VWAP is seen as a good fill. Traders also read price above VWAP as an up day. StockCharts warns that VWAP lags, is erratic early in the day, and is meant for intraday charts only.

Market breadth: how many shares join in

A stock index such as the EGX30 is weighted by company size. A few large companies can lift it while most shares fall. Breadth counts heads instead.

• Advancers vs decliners: how many shares closed up and how many closed down.
• Advance/decline (A/D) line: a running total of advancers minus decliners each day.

On 20 October 2026, the EGX30 rose 1.94%. 165 shares advanced, 44 declined and 14 were unchanged (closing figures reported by the Middle East Observer). That is broad participation: net advances of 121.

Worked example (example, not market data)

Say the index still rose on day 3 because a few large companies went up. The A/D line falls while the index rises. Analysts call that a divergence, a sign the rally is narrowing.

The limit: every share counts the same, whatever its size or volume. Most listed companies are small, so breadth leans toward them.

Sentiment: who is buying, and how the crowd feels

Investor flows in EGX reports

Egyptian closing reports split each session's trading by nationality (Egyptians, Arabs, foreigners) and by type (institutions, individuals). They show each group's share of trading and its net buying or selling.

Check the October row: 82.1 + 13.9 − 96 = 0. Net flows always add up to zero, because every share bought was sold by someone. "Foreigners were net buyers" only means another group sold to them.

That day, institutions bought a net EGP 136.2 million and individuals sold the same amount. Turnover was EGP 9.129 billion, but about EGP 1.29 billion (14.2%) came from one new listing's first day. One event can inflate a day's value traded.

Fear and greed gauges

Gauges like CNN's Fear & Greed Index (launched in 2012, US shares only) blend seven measures, including momentum, breadth, options and safe-haven demand, into a score from 0 (extreme fear) to 100 (extreme greed).

Sentiment is read two opposite ways:

Capital.com notes such gauges ignore fundamentals and have given false signals. Neither reading is reliable alone.

Where these indicators mislead

• Low liquidity. In thinly traded shares, one order can create a "volume spike" and move the price. The SEC warns that thin trading makes it easier to manipulate a share's price or volume, and that unexplained jumps in volume may suggest manipulation.
• Block deals. One large negotiated trade shows up as huge volume and value, and swings OBV, without telling you about the crowd.
• News-driven days. A new listing, an index change or a dividend date can inflate volume for reasons unrelated to demand.
• Hindsight. Divergences look obvious on old charts. In real time, many never lead anywhere.

Limits: speculation and fees

Using these signals to buy and sell over days or weeks is short-term trading, which is speculation, not long-term investing. Every trade pays your brokerage's commission plus exchange and other fees. Frequent trading on small signals can see those costs eat most of the gains.

Volume and sentiment describe what the crowd did. They say nothing about whether a company is worth its price.

Your plan

1. Read the closing report. When you see "the EGX30 rose", check the advancers vs decliners. Was it broad or narrow?
2. Check the turnover. Compare it with recent days. If it jumped, look for a block deal or a new listing behind it.
3. Read the flows calmly. Remember that net flows add to zero. "Foreigners bought" is one side of a trade, not a forecast.
4. Treat extremes as context. Extreme fear or greed tells you about mood, not timing.
5. Keep your plan separate. Use these to understand market news, not to trigger trades. Your long-term plan should rest on your goals, costs and diversification.

This guide is for education only. It is not advice to buy or sell any share or fund.