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Harold Gartley, Pioneer Of Volume

11/12/02 03:51:43 PM PST
by James Maccaro

The secret lies in the volume.

Gartley began his career in 1912 and remained active through the 1960s. He had in common with legendary Wall Street figures such as Bernard Baruch and Jesse Livermore that he began his career as a "board-boy" for a brokerage house. His job was to write the latest stock prices on blackboards displayed in the firm's lobby for customers. From that, he progressed to become a stockbroker and analyst. From 1934 to 1947, Gartley ran his own research company, which was one of the leading independent securities analysis firms of the day. He was also one of the founders of the New York Society of Security Analysts and, in the late 1940s, founded a firm specializing in investor relations.

Gartley presented his ideas about volume in numerous articles and speeches and in a book published in the 1930s, entitled Profits In The Stock Market. He posed an intriguing question: "Is it volume that causes price changes, or do price changes cause volume — the hen or the egg, which came first?" He saw volume not as a trigger of events, but rather as a barometer of market conditions. He equated volume with "market pressure," which he concluded depends on the supply and demand of stocks. He advocated four primary general rules about volume:

  1. When a volume increase is coupled with a significant price change, either higher or lower, prices are likely to continue in the same direction.
  2. A volume decrease indicates that prices are likely to change direction.
  3. Volume of a speculative issue usually increases as the price moves up, reaching a peak just prior to the stock reaching its highest price. Conversely, volume will decrease as price declines.
  4. Volume increases during a bull market and decreases during a bear market. Bear markets, Gartley asserted, "begin in great activity and end in pronounced dullness."

Gartley made a distinction between volume when a stock's price is increasing and when it is decreasing. He designated the number of shares traded during price advances as "demand volume," because he concluded that the volume was driven by increased demand for the stock. The number of shares traded during price declines is "supply volume," because, according to Gartley, investors dump shares and increase supply.

Under his system, increasing supply volume (that is, increased trading during periods of price declines) and decreasing demand volume (that is, decreased trading during bullish trends) are bearish indicators. Conversely, increasing demand volume (that is, increased trading during a bull market) and decreasing supply volume (that is, decreased trading during periods of price declines) are bullish indicators.

Further, Gartley asserted if volume sharply rises after a period of rising prices, and the price advance slows or stops, that suggests the balance between supply and demand has shifted and that prices will decrease. Likewise, a decrease in volume after a bearish trend indicates prices have stabilized and the downward pressure has eased.


According to Gartley, high levels of initial volume characterize bear markets. He cited the period from November 1929 to April 1930, when volume increased immediately following the crash of October 1929. He attributed this to the combined forces of the increased supply and demand of stocks. The increased supply at the beginning of a bear market is triggered by investors covering losses, whom he referred to as "liquidators," but they are matched by an increase in demand because of purchases by optimists hoping to obtain bargains.

After observing the markets for several decades, Gartley developed a detailed chronology for typical bear markets. Initially, optimists enter the market in the belief that price drops are temporary and offer a tantalizing opportunity for quick profits. Currently, this process is known as "buying on the dips." However, fear grows as a bear market persists. Supply volume then reasserts itself.

As investors recognize they might get caught in a bear rally, rather than a true market turnaround, they become increasingly eager to sell, even at unattractive prices. At this point, liquidation will continue but the optimists' demand for stocks will fall off. As prices continue to decline, the attractiveness of "bargain hunting" further erodes due to fears of possible declines. Potential buyers are discouraged, which causes demand to decline. At the same time, supply increases because many people who bought at the earlier stages of the bear market join the liquidators.

As panicked sellers leave the market (having sold most of their stocks at significant losses) and are joined on the sidelines by the disillusioned former optimists, volume will reach low levels. Gartley concluded that not until "the force of liquidation is spent" will a bear market end.

Bull market volume, according to the early-day analyst, is initially relatively low because a bull market usually evolves from the "extreme dullness" that characterized the end of the preceding bear market. However, as the bull market gains strength, demand volume will increase until it reaches a crescendo that continues during the peak of the bull market but then falls off as supply volume asserts itself.


Harold Gartley applied his analysis of volume to both the general market and to individual securities. He also asserted that the ratio of volume for a particular stock to the volume for the market as a whole is important. He labeled these relationships as "volume ratios" and stated that increasing volume ratios provide confirmation of other bullish or bearish indicators relative to that stock. Conversely, a decreasing volume ratio suggests that a trend is about to change.

Gartley based his studies of volume on his experiences on Wall Street during much of the 20th century, particularly the boom years of the 1920s and the bust that followed. His insights about volume provide a valuable starting point for the investors of the 21st century.

James Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas on Liberty, The Massachusetts Law Review, and other periodicals.


Gartley, H.M. [1981]. Profits In The Stock Market, Traders' Press (reprint from 1935 original).

Current and past articles from Working Money, The Investors' Magazine, can be found at

James Maccaro

James Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas on Liberty, The Massachusetts Law Review, and other magazines. His law journal articles have been cited in several legal decisions, including by the US Court of Appeals for the DC Circuit and by the US Supreme Court. James A. Maccaro is an attorney and freelance writer. He has written articles for Newsday, Ideas on Liberty, The Massachusetts Law Review, and other magazines. His law journal articles have been cited in several legal decisions, including by the US Court of Appeals for the DC Circuit and by the US Supreme Court. He may be reached at

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