In 2024, the index saw two peaks in trading volume.

The first peak in trading volume occurred on February 28th, with a total of 1.35 trillion in trading volume across the two markets.

On that day, the Shanghai Composite Index fell by 1.9%, and the Shenzhen Composite Index fell by 2.4%. The index surged and then retreated, with small-cap and micro-cap stocks experiencing a significant drop.

Subsequently, the market began to contract in volume, and by April 23rd, the volume had shrunk to 750 billion.

In less than two months, 600 billion in trading volume had vanished.

The second peak in trading volume was on April 29th, with a total of 1.21 trillion in trading volume across the two markets.

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On that day, the Shanghai Composite Index rose by 0.79%, and the Shenzhen Composite Index rose by 2.22%. The index showed a pattern of breaking through a platform.

After that, the market began to contract in volume, then formed a top, and fell all the way down. By the end of June, the volume was only 600 billion.

In less than two months, 600 billion in trading volume had disappeared again.

So, what does the contraction in index volume indicate?If you were in the market at that time and didn't understand, that's okay.

But if it's already the time for review and you still don't understand, then there's a problem.

The first time the market saw an increase and then a decrease in volume was on February 28th. The reason for the increase in volume at that time was the shift in chips and sectors.

From the sharp drop in small and micro-cap stocks to the profitable rebound, a large amount of capital was realized on February 28th.

Since then, the overall trend of the index has been stronger than that of individual stocks.

As for the decrease in volume, it is actually a large amount of capital that fled from small and micro-cap stocks and then did not return to this direction.

Although in mid-to-late March, the stock prices of small and micro-cap stocks were slightly higher than on 2.28, in fact, the capital had already withdrawn.

This also laid the groundwork for the sharp drop in small and micro-cap stocks in mid-April and early June.

To put it bluntly, the point of capital withdrawal was not at the absolute high point, but had withdrawn in advance.The second time of volume expansion and contraction occurred on April 29th. At that time, the reason for the market's volume expansion was to break through and lure more buyers.

The index breaking through 3100 should have been a good thing.

Because the platform fluctuation between 3000 and 3100 had been going on for nearly two months, it was time for a breakthrough.

It is also quite normal for the breakthrough to require volume expansion, so the market cooperated by expanding the volume.

However, after the breakthrough, the market immediately contracted in volume, with only over 800 billion in transaction volume above 3150, barely supporting it.

The contraction in this area is actually due to insufficient incremental funds, and the main force is troubled by the inability to sell.

So, after a period of high-level consolidation, it began to collapse.

The so-called collapse refers to the index never breaking through the 5-day moving average on the way down.

Many people mistakenly believe that volume contraction means funds are locked, in fact, volume contraction means no one is taking over.

Ask yourself, if the stock price is at a high level, are there more people who want to sell or more people who want to buy?It must be that there are more people who want to sell.

So why is there no increase in trading volume? It's because the main force has seen that the support funds are relatively weak. Once they choose to sell, they will face a collapse, which is very dangerous.

An increase in trading volume during a rise is a normal phenomenon, while a reduction in volume must be an abnormal behavior.

If the main force holds the warehouse for a long time and the trading volume is insufficient, the number of followers will decrease, and the difficulty of selling out will also be very large.

For those that have a reduction in volume and an increase in price, unless it is a stock that has been locked in by some long-term funds.

Otherwise, once multiple top deviations appear, the stock price will still fall.

In this situation, for the main force that wants to pull up and sell out, there is no advantage at all.

Therefore, once the market reduces its volume, most of the time, it falls into a dilemma.

A healthy market does not necessarily need to increase its volume every day, but the volume must be maintained at a stable level.

A market with continuous reduction in volume must have hidden dangers, but sometimes the rise covers up the problem itself.The problem concealment is only temporary, and the risks that should be exposed will eventually erupt.

As for the claim that a reduction in trading volume must lead to a change in the market trend, this is not necessarily true, so don't jump to conclusions at the slightest hint of news.

The interpretation of reduced trading volumes in indices and individual stocks is somewhat different.

The increase and decrease in trading volume of individual stocks is the behavior of a single major force, or in other words, the action of a market manipulator.

There are some stocks that, when there is no trading volume, only have transactions of tens of millions, but when the volume increases, it can reach hundreds of millions, or even billions.

It can be said that they are highly manipulable.

However, the increase and decrease in trading volume of an index cannot be manipulated, but is a collective behavior.

The increase and decrease in trading volume of an index have obvious guiding significance and value for the market situation.

If you can understand the trading volume of the index, you can predict the direction and trend changes of the index, which can help increase the success rate of trading.How can we interpret the volume of an index, and what do shrinking and expanding volumes represent?

Here are three key points for everyone.

1. Volume expansion is always better than volume contraction.

An index with expanding volume is a good thing, regardless of whether it rises or falls.

Volume expansion indicates that there is capital participation, and for the market to rise, capital participation is necessary.

A market with contracting volume has less active capital, so how could there be any significant market movement.

The real profit effect is not about cheap valuations; there are many times when valuations are cheap, but still, no capital is bought in.

Only when the market rises and the profit effect comes up, will the capital naturally come.

When the capital comes, the volume naturally begins to expand, so volume expansion is always better than volume contraction.

2. High position volume contraction, regardless of rising or falling, it is necessary to reduce positions.

(Note: The original text seems to be cut off or incomplete at the end, so I've translated up to the point where it was clear.)Reduce positions when there is a high position with reduced volume, regardless of whether it continues to rise.

A high position with reduced volume implies that there is no more incremental capital, which is very terrifying.

The so-called "long-term consolidation must fall" refers to a high position with reduced volume and horizontal consolidation, with no capital chasing the rise.

Moreover, once the reduced volume starts to fall, it becomes a bottomless pit.

Because the main capital cannot smoothly escape at a high position, and there is less capital to take over, and then slowly distribute, it will evolve into a continuous decline.

3. Do not blindly add positions when there is an increase in volume at a low position.

A low position is destined to have reduced volume.

Because at a low position, everyone is trapped and not very willing to trade.

But if there is an increase in volume at a low position, it means that a large number of chips are exchanged at a low position, which is not a normal phenomenon.

Unless the index falls, causing some chips to be passively cleaned, such as margin calls and so on, otherwise it represents that there is still a difference at this point.If there is a significant divergence at a certain position, it implies that this point may not be the true low, or the bottom.

At this time, if you want to increase your position, you should be very cautious.

The reduction in volume of the index, regardless of the circumstances, means that large capital is "resting," and the willingness to trade is relatively weak.

In a market environment with a weak willingness to trade, opportunities are naturally fewer.

This is why during times of reduced volume, it is best to remain cautious and reduce the frequency of trading.

Many retail investors like to be busy with short-term trading, but short-term trading is the most focused on hot spots and the sentiment of the capital side.

Many times, we cannot trade in a way that puts the cart before the horse.

We should recognize the signals given by the market, and even more so, follow the capital in the market to make decisions, and know how to rest when it is time to rest.