Glossary Term

Volume Climax

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A volume climax is a fascinating psychological phenomenon that can be observed in the very final stages of bullish or bearish market cycles, particularly in overheated markets prone to bubble-like action. It is characterized by a massive spike in bullish or bearish volume that sends the price to inflated highs or undervalued lows. The top of a bull cycle is normally accompanied by a great deal of euphoria. Investors have ridden the price all the way to the highs and have made a great deal of money. It feels like the party will never end and everyone involved is a genius. Before an asset tops out and plunges back down there is usually a final push of extreme activity. The bottom of a bear cycle, on the other hand, is accompanied by a sense of dejection and capitulation. Those still invested have seen their value drop several times over and have now given up on any prospect of making their money back. They sell whatever they have left and get the hell out of Dodge.

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