Stop and Make Money: How to Profit in the Stock Market Using Volume and Stop Orders

By Richard W. Arms, Jr.

Quick Summary

A practical guide to using volume analysis and stop orders as the foundation of a stock trading methodology. Richard Arms, creator of the Arms Index (TRIN) and Equivolume charting, demonstrates how volume -- not price -- is the primary driver of market movements, and how stop orders can be used both defensively (to limit losses) and offensively (to enter trending positions at optimal prices).

Executive Summary

"Stop and Make Money" builds on Richard Arms' lifelong work studying the relationship between volume and price in the stock market. Arms, who invented the Arms Index (also known as TRIN, a widely used market breadth indicator) and developed Equivolume charting (which sizes price bars by volume rather than time), presents a trading approach centered on two principles: (1) volume is the driving force behind price movement and should be the primary analytical focus, and (2) stop orders are the most versatile and powerful tool available to stock traders. The book covers how to use volume to identify the strength or weakness behind price moves, how to set effective stop-loss orders, how to use stop orders for entry (buy stops above resistance, sell stops below support), and how to combine volume analysis with stop order placement for a complete trading methodology.

Key Concepts

1. Volume as the Primary Driver -- Price follows volume; strong volume on advances signals genuine buying pressure
2. Equivolume Charting -- A charting method that visually represents volume alongside price
3. The Arms Index (TRIN) -- A market breadth indicator comparing advancing/declining issues with advancing/declining volume
4. Defensive Stop Orders -- Protecting positions from excessive loss
5. Offensive Stop Orders -- Using buy stops and sell stops to enter breakout and breakdown trades

Critical Assessment

Strengths

• Written by the inventor of widely used market analysis tools
• Clear, practical approach combining volume and stop orders
• Both defensive and offensive uses of stops are well explained
• Grounded in decades of market observation

Limitations

• Volume analysis in the age of algorithmic trading may be less informative
• Equivolume charting is not widely supported by modern platforms
• Limited coverage of non-equity markets
• Some concepts may be basic for experienced traders

Conclusion

Arms provides a focused, practical methodology built on the sound principle that volume reveals the conviction behind price movements. The integration of volume analysis with intelligent stop order placement creates a coherent trading framework.