Forex for a trader
Volumen forex

Volumen forexVolume is the number of shares traded during any certain time-period, (e. g., an hour, a day, a week, a month). It is one of the simplest but essential analyses of volume, which offers investors a tool of technical analysis and effective clues as to the intensity of a certain price shift. High volume is characteristic of market tops when a consensus forms believing that prices will move higher. High volume is also typical while launching new trends as prices emerge from a trading range. Because of panic-driven selling volume often increases just prior to market bottoms, which usually happen during consolidation periods where prices move sideways in a trading range. Low volume also often appears during the indecisive period during market bottoms. There is a majority of low volume levels during consolidation periods. This happens due to the indecisive expectations during consolidation periods, when prices shift sideways within any narrow trading range. Also low volumes may appear during market bottoms, another "indecisive period. " Volume can also be useful in defining the health of an existing trend. A healthy up-trend should have higher volume on the upward motion of the trend, and lower volume on the way down. A healthy lower volume on the upward corrective legs and downtrend usually has higher volume on the downward legs of the trend. Trading with Volume indicator offers the following features: Volume confirms the strength of a trend or suggests about its weakness. A rising volume indicates rising interest among traders, while a falling volume suggests decline in interest. Extreme Volume readings — Climax Volume often highlight price reversals. Points where market trades on high volume are the points of strong support and resistance.

All various kinds of breakouts and market spikes can be validated or voided with a help of Volume indicator. Why Volume? Volume is the second most valuable data after the price itself. Large volume signifies that there is large number of market participants involved, including financial institutions. The last ones bring the highest turnover to the market, and if they are trading, it means the interest to the price at certain point andor to the trend overall is high. Small volume tells that there are very little participants in the market, neither buyers no sellers have any significant interest in the price. In addition, no financial institutions will be involved, thus a market is going to be moved only by individual traders and so the move will be weak. Volume helps to learn about the health of a trend. An uptrend is strong and healthy if Volume increases as price moves with the trend and decreases when price goes counter trend (correction periods). When price is going up and volume is decreasing, it tells traders that a trend is unlikely to continue.

Price may still attempt to increase at a slower pace, but once sellers get the grip on it (which will be signified by an increase in volume on a down candle), the price will fall. A downtrend is strong and healthy if volume increases as price moves lower and decreases when it begins retracing upwards. When price is falling and volume is decreasing, the downtrend is unlikely to continue. Price will either continue to decrease, but at a slower pace or start to rise. Volume and Reversals. To understand the nature of spike in volume before a trend reversal, traders need to know how the data for volume indicator is gathered in Forex. Forex volume cannot be measured precisely as it is done, for example, in Equity market, where every share traded equals 1 volume, and selling 200 shares means 200 in volume. Forex by nature cannot count how many contracts and what sizes of contracts were traded at any given time, because the market is wide and decentralized. Therefore to count volume in Forex the number of tickschanges in price is used. 1 tick measures 1 volume. As it moves up and down volume adds up. When volume rises, it means lots of participants are actively selling and buying currencies. When volume spikes at certain price level, traders know that there was lots of interest shown by traders to that price level.

If there is a lot of interest, it means the level is an important one. This simple observation of a volume indicator allows identify important Support and Resistance levels, which would certainly play significant role in the future. Where Volume spikes are distinctively extreme (larger than any historical spikes around) — Climax Volume — traders should look for clues from the price itself. Candles that have a narrow range, spinning topsbottoms, dojies, stars, other candles with extremely large tails have highest chances to become the price turning points. Single volume spikes only bring price to a halt. A lot of stand-alone average volume spikes occur during fundamental economic announcements on daily basis. News can cause spike in volume for a single day and then volume disappears again. Reversals, however, happen not over one day but a series of days. If higher than average volume stays on the market for several to many days a huge volume spike — volume climax — will crown a point of market reversal. Volume and Breakouts. Volume indicator helps to validate all kinds of breakouts. When market is consolidating on a low volume, a sudden pick up in volume would signify that a breakout is due. Breakout occurring on rising volume is a valid breakout, while a breakout that caused no interest from traders as it is happening on a low volume is more likely a false one. Trend lines and other breakouts are validated or voided the same way. Reading Volume Indicator step by step.

We’ll compare the weeks, not individual days. Week 1: as price falls, volume rises compare to previous week – interest to downtrend among traders grow. Week 2: volume peaks and begins to decrease as price move higher – sellers are still interested in downtrend, buying the currency is going on a lower volume. 3: volume is lower than previous weak, confirming that there is still very little interest in buying the pair. 4: Sellers push down, but this time volume doesn’t increase – it is about equal to week 3. 5: Both sides lost interest as the market drifts sideways on low trading range. 6: market finally finds dome buying interest as the week ends on higher than previous week volume. Buyers seem to be going active. 7: Buyers going full steam – volume rises – it is a healthy uptrend. 8: Correction came – volume drops, no one is interested in Selling the pair – confirmation of a healthy volume. 9: Volume picks up again once price finds its uptrend.

10: Exhaustion gap is seen on the chart, followed by a doji candle with a spike in volume – a highlight of a market turning point. Market ends trading on a lower volume. 11: Even Sunday was busier than usual. The new week market begins with an attempt to rise higher, however volume suggests that the interest to the upper side is much lower. 12, 13 and 14: market attempts to move upward, but volume decreases, signaling that the trend is no longer healthy and a change is coming soon. 15 and 16: some interest arises among traders as the market moves to the downside, Sellers anticipate that this is a moment of a trend change, a volume of new Short orders come. 17, 18 and 19: as the market attempts to rise, volume drops, telling that there is no interest to the upside. 20, 21 and 22: volume picks up again as Sellers take over. A pause on week 21 with a sharp rise in price is met by even higher volume on week 22. 23, 24, 25, and 26: market rises, volume drops – confirmation that remaining traders lose interest in that upward move. 27 and 28: Price begins to decline, volume picks up – interest to the downside is present. 29, mid 30: sideways pattern pause the trend and the volume with it. 30, 31 and so on – trend picks up making new lows, volume confirms healthy trend by rising when price is falling and pausing or falling when price is moving sideways or going into correction. How to Use Volume to Improve Your Trading. Volume is a measure of how much of a given financial asset has been traded in a given period of time.

It is a very powerful tool but is often overlooked because it is such a simple indicator. Volume information can be found just about anywhere, but few traders or investors know how to use this information to increase their profits and minimize risk. TUTORIAL: Analyzing Chart Patterns. For every buyer, there needs to be someone who sold them the shares they bought, just as there must be a buyer in order for a seller to get rid of his or her shares. This battle between buyers and sellers for the best price in all different time frames creates movement while longer-term technical and fundamental factors play out. Using volume to analyze stocks (or any financial asset) can bolster profits and also reduce risk. (See also: Technical Analysis: The Importance of Volume .) Basic Guidelines for Using Volume. When analyzing volume, there are guidelines we can use to determine the strength or weakness of a move. As traders, we are more inclined to join strong moves and take no part in moves that show weakness – or we may even watch for an entry in the opposite direction of a weak move. These guidelines do not hold true in all situations, but they are a good general aid in trading decisions. Volume and Market Interest. A rising market should see rising volume. Buyers require increasing numbers and increasing enthusiasm in order to keep pushing prices higher. Increasing price and decreasing volume show lack of interest, and this is a warning of a potential reversal. This can be hard to wrap your mind around, but the simple fact is that a price drop (or rise) on little volume is not a strong signal.

A price drop (or rise) on large volume is a stronger signal that something in the stock has fundamentally changed. (For more, see Market Reversals and How to Spot Them .) Exhaustion Moves and Volume. In a rising or falling market, we can see exhaustion moves. These are generally sharp moves in price combined with a sharp increase in volume, which signal the potential end of a trend. Participants who waited and are afraid of missing more of the move pile in at market tops, exhausting the number of buyers. At a market bottom, falling prices eventually force out large numbers of traders, resulting in volatility and increased volume. We will see a decrease in volume after the spike in these situations, but how volume continues to play out over the next days, weeks and months can be analyzed using the other volume guidelines. (For related reading, take a look at 3 Key Signs of a Market Top .) Volume can be very useful in identifying bullish signs. For example, imagine volume increases on a price decline and then the price moves higher, followed by a move back lower. If the price on the move back lower stays higher than the previous low and volume is diminished on the second decline, then this is usually interpreted as a bullish sign.

Volume and Price Reversals. After a long price move higher or lower, if the price begins to range with little price movement and heavy volume, this often indicates a reversal. (See Retracement or Reversal: Know the Difference for additional information.) Volume and Breakouts vs. False Breakouts. On the initial breakout from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in volume or declining volume on a breakout indicates lack of interest and a higher probability for a false breakout. (See also: The Anatomy of Trading Breakouts .) Volume should be looked at relative to recent history. Comparing today to volume 50 years ago provides irrelevant data.

The more recent the data sets, the more relevant they are likely to be. Volume indicators are mathematical formulas that are visually represented in most commonly used charting platforms. Each indicator uses a slightly different formula, and therefore, traders should find the indicator that works best for their particular market approach. Indicators are not required, but they can aid in the trading decision process. There are many volume indicators, and the following provides a sampling of how several of them can be used. On-Balance Volume (OBV): OBV is a simple but effective indicator. Starting from an arbitrary number, volume is added when the market finishes higher, or volume is subtracted when the market finishes lower. This provides a running total and shows which stocks are being accumulated. It can also show divergences, such as when a price rises but volume is increasing at a slower rate or even beginning to fall. Figure 5 shows that OBV is increasing and confirming the price rise in Apple Inc's (AAPL) share price. (For more on the OBV, see On-Balance Volume: The Way to Smart Money .) Chaikin Money Flow: Rising prices should be accompanied by rising volume, so this formula focuses on expanding volume when prices finish in the upper or lower portion of their daily range and then provides a value for the corresponding strength.

When closes are in the upper portion of the range and volume is expanding, the values will be high; when closes are in the lower portion of the range, values will be negative. Chaikin money flow can be used as a short-term indicator because it oscillates, but it is more commonly used for seeing divergence. Figure 6 shows how volume was not confirming the continual lower lows (price) in Apple stock. Chaikin money flow showed a divergence that resulted in a move back higher in the stock. (For related information, see Discovering Keltner Channels and the Chaikin Oscillator .) Klinger Volume Oscillator: Fluctuation above and below the zero line can be used to aid other trading signals. The Klinger volume oscillator sums the accumulation (buying) and distribution (selling) volumes for a given time period. In the following figure we see a quite negative number – this is in the midst of an overall uptrend – followed by a rise above the trigger or zero line. The volume indicator stayed positive throughout the price trend. A drop below the trigger level in January 2011 signaled the short-term reversal. The price stabilized, however, and that is why indicators should generally not be used in isolation.

Most indicators give more accurate readings when they are used in association with other signals. (See Trend-Spotting With the AccumulationDistribution Line for more.) Volume is an extremely useful tool, and as you can see, there are many ways to use it. There are basic guidelines that can be used to assess market strength or weakness, as well as to check if volume is confirming a price move or signaling a reversal. Indicators can be used to help in the decision process. In short, volume is a not a precise entry and exit tool – however, with the help of indicators, entry and exit signals can be created by looking at price action, volume and a volume indicator. (For additional reading, take a look at Interpreting Volume for the Futures Market .) Trading Volume In Forex, a must needed guide. Hello, Forex Traders! Have you ever traded futures andor stocks? Irrelevant of the answer, everyone knows how important volume is the analysis of stocks and futures.

Volume, open interest and price action are the key components in trading decisions. Did you notice that volume does not have the same importance as in stocks and futures? Or, in fact, did you ever use the volume on your Forex chart? How is volume measured in the Forex market? Does the Forex market use volume levels as well? We are going to discuss all of these questions and more. Please write down your own experiences in the comment section down below. By the way, don’t forget to read last week’s article on the “Path to Forex Trading Mastery”. It is well worth your time as you will be able to identify how advanced your trading is and how you can move on to the next level! VOLUME MEASUREMENT The Forex market is a decentralized market, which means that there is no formula for volume or method of keeping track of the number of contract and contract sizes, such as in the stock market. The Forex market measures volume by counting the tick movements. The logic behind this is straightforward: a) Price moves up and down in ticks b) The Forex market cannot measure how many contracts are sold, but it can measure how many ticks price moves up or down in any given time frame c) It can still be measured by measuring how many ticks price moves up and down d) Therefore, irrespective of how many transactions have been completed to make price move, the net effect will be measured It is the equivalent of focusing on the next result instead of analyzing the process. The volume measurement in the Forex market is looking at how much price moves within a certain period and it does not care how many or few buying and selling transactions are in fact needed to make that price move 1 tick.

All it knows is how many ticks it moved, regardless of the fact if 100 trades were involved or 10,000. Here you can see a funny video about trading levels. Price action is always our primary focus and we should never forget that!! Write it down on a piece of paper, if need be, with a thick yellow mark: price is the number 1 measurement! Almost everything is derived from price and calculated based on price, so using price action as the primary source for decisions is only logical. Using volume to define trading decisions makes sense if it is used as a confirmation . Here are its primary advantages: 1) CONFIRM TREND STRENGTH: Volume can confirm the trend direction as traders want to see increased volume in the direction of the trend and decreased levels of volume when the currency pair is correcting in the opposite direction of the trend. For an uptrend, this means increased volume when the price is moving up and decreased volume when the price is moving down. For a downtrend, this means increased volume when the price is moving down and decreased volume when the price is moving up. 2) IDENTIFY TREND WEAKNESS: If price is reaching new levels of extremes (higher highs or lower lows), but volume is not confirming and supporting those new price levels, then this could provide first warning signals that the trend is weakening (retracement can be expected) or ending (reversal potential, or sideways range movement). Read here more information how to interpret divergence.

3) BREAKOUT CONFIRMATION: During a consolidation, volume measurements typically are low. If volume picks up upon the break of that consolidation pattern (wedge, triangle, flag, etc), then the volume is confirming a higher chance of a sustainable breakout. Read more on trading breakouts here. In previous articles of mine, we have discussed how to interpret the above-mentioned elements. Please go to these links for detailed and in-depth information: A) How to trade with oscillators B) Keeping trading simple C) The secret in becoming the best Forex trader D) How to build a winning trading strategy ACCUMULATIONDISTRIBUTION Accumulation is a phase when buyers are controlling the market. If the volume is increased when the market is correcting in a downtrend, then this typically means that more buyers are stepping into the market and a reversal could occur. Usually, these are confirmed when: a) Volume increases compared to the day before but closing prices are higher b) Price hardly moves down, even though volume has increased Distribution is a phase when sellers are controlling the market. If the volume is increased when the market is correcting in an uptrend, then this typically means that more sellers are stepping into the market and a reversal could occur. Usually, these are confirmed when: a) Volume increases compared to the day before but closing prices are lower b) Price hardly moves up, even though volume has increased There is an indicator that measures this accumulationdistribution balance and is called AccumulationDistribution (AD). It is calculated as follows: AD = ((Close – Open) (High – Low)) * Volume If the indicator is falling then it indicates distribution (selling) of the currency. If the indicator is rising then it indicates accumulation (buying) of the currency. METHODS TO CALCULATE VOLUME. Here is a list of tools a Forex trader can choose from. VOLUME: The most logical place to start is the volume indicator.

This tool calculates the number of ticks which a currency moves up and down. It is often used in other calculations as well. For instance, the AD methodology mentioned in the paragraph above includes volume as part of its basic parameters. ON BALANCE VOLUME (OBV): The tool was developed by Joe Granville and is used to detect whether the volume is bearish or bullish oriented. OBV marks the particular volume of the day as a bearish or bullish depending whether the day has been bearish and bullish. It then addsdetracts that volume to the running open total. The total then indicates the overall sentiment of the market. MONEY FLOW INDEX: The money flow index shows the money flow and is calculated in a few steps. I recommend going to this link to read the steps yourself. MARKET FACILITATION INDEX (MFI): The MFI is created by trader Bill Williams and is based on volume as well. The MFI is calculated by: MFI = (high – low) volume The formula is very simple, yet provides various interpretations in combination with volume.

There are 4 different combinations based on MFI and volume. The color codes have the following meaning: COLOR MFI VOLUME MEANING B. WILLIAMS DESCRIPTION 1) Green MFI UP VOLUME UP TREND CONT GREEN 2) Brown MFI DOWN VOLUME DOWN TREND END FADE 3) Blue MFI UP VOLUME DOWN SPIKES FAKE 4) Pink MFI DOWN VOLUME UP START SQUAT Green indicates a strong trend continuation mode. Brown indicates a potential area of the trend ending. Blue occurs in environments when a market spikes into 1 direction, often causing confusion about the trend direction. Pink indicates the beginning of a trend continuation or reversal. These are the volume tools you can use in the Forex market. Remember, the volume is important for the analysis of stocks and futures. Volume, open interest and price action are the key components in trading decisions . Please let us know your opinion down below! Thanks for reading and for sharing the article! Have a great weekend and Good Trading! Thank you for reading! Please leave a comment below if you have any questions about this trading volume ! Also, please give this topic of trading volume a 5 star if you enjoyed it! ( 1 votes, average: 5.00 out of 5) Volume indicators are used to determine investors' interest in the market.

High volume, especially near important market levels, suggests a possible start of a new trend, while low volume suggests traders uncertainty andor no interest in a particular market. In Forex Volume data represents total number of quotes for the specified time period. Forex Volume Indicators: Acceleration Bands Market Facilitation Index Volume Chaikin Money Flow (CMF) Accumulation Distribution Volume Oscillator (PVO) Demand Index On Balance Volume (OBV) Money Flow Index (MFI) VWAP (Volume Weighted Average price) The methodology of using Volume indicators. When Volume increases it indicates a growing interest in the market, therefore it may strengthen a main trend or start a new trend; When Volume decreases it indicates that interest in the market is decreasing, which calls for either a trend reversal or temporary market consolidation; Sudden and vigorous increase in Volume may signal for an upcoming reversal, while gradual decreasing in Volume may still be supported by rapid price moves. how can the actual volume be calculated if there is not a central location, how are they are to keep track of orders brought and sold. Volume indeed cannot be calculated based on the number of contracts traded and the size of those contracts since Forex market is decentralized by its nature. Volume is calculated based on price ticks. 1 tick is 1 volume. As price changes back and forth, volume adds up. High volume will have lots of such simple tick shifts, while low volume - very little. I've been trading in stocks for the past 7 years using only price, volume and OBV and it has worked very well for me. My question is, will this type of analysis also work in Forex? Kamil sharesmadeeasy.

com. Yes, it will. Forex uses the same technical approach for analysing volume. There is an important volume index that doesn t appear in the list: the market facilitation index. I use it for the last year at to me, it is the best volume indicator in the market, since it takes into account not only the pips fluctation accumulation but also the intensity of the variation of each movement of each movement of the cursor price. Combined with a couple other indicators to measure the trend and the momentum and then you have a very stable trading system. Thank you, the indicator has been added. Market Facilitation Index. I've looked everywhere for the Chaikin Money Flow Indicator and can't find anything! First time I've failed to find what I was looking for. Can you help please? Forex Volume Indicator – MT4 Trading Strategies. Traders were always fascinated by a market’s volume.

Various volume trading strategies appeared and evolved in time. While Forex volume is a tricky concept, Forex volumes indicators do exist. A volume indicator mt4 traders use is similar to any volume indicator from other markets. When traders focus on volume, they want to spot market secrets. Or, where the smart money buys or sells? We all know the Forex market is complex. Its liquidity is the biggest in the world. Over five trillion dollars in daily Forex volume represents something. Despite such a volume, the market is also volatile. Or, maybe, because of it. For the Forex trader, volume trading strategies are a bit more complicated than others.

There’s a reason for that. While other indicatorsoscillators have a straightforward interpretation, the volume indicator’s one is relative. As such, the volume indicator mt4 platform offers is subject to interpretation. But, there are multiple Forex volumes indicator strategies. And, various indicators that use the market’s volume. This article aims to cover the most important ways to use Forex volume. Therefore, it will deal with the following; Different ways to use the Forex volumes indicator. How to Use Time Segmented Volume – one of the best ways to spot reversals. Why the volume spread analysis indicator is such a powerful trading tool and how to use it in the Forex market. How to trade with the On-Balance Volume indicator. A few Forex trading tricks when using the Chaikin Forex volumes indicator. In any case, one thing should be said from the start. In the Forex market, the volume is tricky.

What you see in the spot Forex market is not the actual traded volume. It is just the volume traded at your broker. What is Forex Volume and Why Traders Care? As mentioned above, the Forex volume you see is just the one traded at your broker. It shows the trading activity of investors with that broker. Yet, volume trading strategies are popular among Forex traders. While the volume indicator mt4 platform offers don’t refer to the whole market, it acts as a proxy. Or, in plain English, it offers an educated guess about the total volume. And about the market’s activity. Traders rely on the broker’s tick volume to give an estimation of the actual volume. Because of that, there are various ways to use volume analysis to spot profitable trades. As a rule of thumb, a volume indicator is typically used together with price analysis. Therefore, traders use it to spot a trend’s strength. The metatrader 4 volume indicator’s interpretation is straightforward. At least the classic one. As such, rising trading volumes signal bullish activity.

And, of course, falling ones show weakness. Today’s Forex market creates different patterns on a chart. Because of automated order types, the market makes different moves than before. It means the classic volume indicator in technical analysis won’t reflect the true state of the market. Different types of oscillator appeared as a result. Traders care about volume, but few use volume oscillators. They offer far more valuable information than price oscillators. Volume oscillators do not travel into overbought or oversold territory like classic ones. In fact, they’re built in a different way. As such, their interpretation differs. Most popular ones look to identify the “big guys” positioning on the Forex market. Yet, all approaches work. Used together, they give an idea about a trend’s exhaustion or strength. How to Use Volume Indicator MT4. Traders care about the information provided by the Forex volumes indicator. It shows potential interest at moments in time.

The standard interpretation is to analyze a trend with the volume indicator. In reality, traders analyze the overall market activity. Not only a trend. For example, one of the best volume trading strategies looks at falling volume while prices increase. That’s a sign of trend weakness. As such, traders look to fade that move. Or, to sell short. How else to use the Forex volume? Another way is to look at bars that stand out of the crowd. Or, they differ strongly from the other ones. That’s a sign of something happening. The volume indicator mt4 trading platform offers can spot the start of a trend. Check the image below for the perfect example.

It happened recently on the EURUSD pair. The Forex volumes indicator registers an “unusual activity” when compared with the other volume bars. This is a sign of strong demand. As such, it is no wonder a strong trend started. Such simple volume trading strategies are sometimes enough to end up on the right side of the market. Why complicate things? But, is this valid one hundred percent of the times? Because volume is relative to the Forex market, the answer is no. Yet, if traders understand the volume indicator’s calculation, they understand the market. The formula goes like this: volume indicator = total valuenumber of transactions during a given period. Therefore, it is no wonder trades look for spikes in volume. They usually come at turning points. Trading with the Time Segmented Volume Indicator. One of the most popular price and time oscillator is George Lane’s Stochastic. It was developed in the 1950’s and reflects the state of the market during those years.

It was range bound for several years. Because of that, such an oscillator works with overbought and oversold conditions. However, a volume oscillator doesn’t have overbought or oversold levels. Instead, it has a simple line. This line acts as an oscillation level for a respective security. It works well for a Forex pair too. One of the best Forex volume oscillators is the Time Segmented Volume (TSV). Don Worden wanted to see where the market has a large-lot activity. And, where it doesn’t. Consequently, the TSV differs from the volume indicator mt4 offers. It is more accurate in showing tops or bottoms. One of the best volume trading strategies with the TSV is to look for divergences. That is divergences between the price and the volume indicator.

Above is the EURGBP daily chart. It shows a divergence between TSV and price. While the actual price made a second low, the TSV didn’t confirm it. This is the power of this Forex volume indicator: it shows a breakout before its happening. Statistically, 80% of all market orders are fully automated now. This makes it difficult to read a chart pattern. Because of that, traditional technical analysis setups don’t work as much as they did before. Trading changed. Head and shoulders, double and triple tops, wedges…they are an important part of technical analysis. But, the Forex market changed since automated trading grew in popularity. Hence, the way a market bottoms or tops changed too. A classic volume indicator mt4 trading platform offers, is not enough anymore. Volume Spread Analysis as a Forex Volumes Indicator. Volume Spread Analysis or VSA as it is also known is a powerful trading theory.

It deals with interpreting candlesticks based on their volume. Williams, Wyckoff, Livermore…they all played an important role in the VSA’s evolution. In fact, the term VSA was first used by Tom Williams to describe the trading methods he used. But what is VSA? And, does it work on the Forex market? The subject is so vast, it is difficult to find a starting point. There’s so much material on it that traders don’t know what the right approach is anymore. It all starts with the retail trader… Retail traders lose money on the Forex market. Most of them.

At least when it comes to their first deposit, retail traders lose. Therefore, who makes money? The answer is that other parties involved make money. Not the retail trader. Big players. Professional traders play big. So, a fair statement would be that if retail traders do the same as professional traders, they stand a chance in the Forex market. This is what VSA is. A volume analysis theory aimed to understand what professional traders do. It starts from the assumption that professional traders leave footprints in volume data. As such, what if one can find them and trade accordingly? Volume Trading Strategies – VSA Explained. VSA works in all markets.

If there’s price and volume, one can interpret a market. The problem is the one of any volume indicator: is the volume reliable? Even if not, like is the case in the Forex market, it still offers a glimpse into what professional traders do. VSA as a Forex volume strategy is difficult to understand. It starts from two basic concepts: no demand and no selling pressure. When the market rises but the volume and spreads decline (spread = range of a candle), there’s no demand. If there’s no demand, the market will eventually fall. Hence, this is bearish. Opposite from the classic volume indicator mt4, VSA looks more similar to Japanese candlestick techniques. After all, Japanese candlesticks techniques deal with candle’s ranges (spreadsshadows) and mostly shows reversal conditions. The VSA is an interesting theory. For example, if a market falls, it doesn’t mean it’s bearish.

If the falling comes with lower spread and volume, the market is actually bullish. Buyers quietly step in. When this happens, it is said that there’s no selling pressure on down bar. Hence, the market gets ready to jump. Above is an EURUSD recent chart. It shows a no selling pressure on down bar situation. For this to happen, traders look for the following: Volume is lower than the past two candles. Spreads are narrowing. Price closes lower than the previous candle. The declining volume together with the narrowing spreads offered a clue that the market gets ready to jump. So, it did. Powerful volume trading strategies like this one show ideal conditions to enter a market. Right before the breakout. Obviously, for a no demand on up bar setup, the conditions are opposite. How to Trade with the On-Balance Volume Indicator.

The On-Balance Volume (OBV) is a cumulative volume-based tool. Simply put, it is a line. However, this line is a special one for several reasons. First, it appears at the bottom of a chart. But, it is not an oscillator. Second, it shows the relation between the number of transactions and the price movements. Hence, it shows volume. Finally, traders use this line to confirm trends. Or, to spot reversals.

If the OBV indicator rises, the trend is bullish. When it falls, the price should fall too. As such, traders look at the OBV to be accurate when predicting the movement of a security. In our case, the move of a currency pair. The OBV’s period can be adjusted. In fact, its calculation method depends on the period considered. To put the power of this volume profile indicator in perspective, consider its calculation. If the current closing price is above the previous one, the current volume gets added to the OBV. If it is unchanged, the volume remains the same. And it is subtracted if the closing is below. Because of these characteristics, it mirrors price action. Hence, when a divergence forms, is a powerful reversal signal.

The AUDUSD chart above shows rising prices. But, the OBV Forex volume declines. Now, that’s a dangerous territory for bulls. The market hesitates. A close look on the left side of the chart shows the OBV mimicking price. Not anymore. Hence, bears will use this opportunity to short sell the pair. Trading Forex with the Chaikin Volume Indicator. Perhaps the best volume indicator, the Chaikin indicator is Marc Chaikin’s creation.

It is a combination between the MACD and the momentum oscillators. More exactly, it measures the momentum of the accumulationdistribution line with the MACD. Traders use it to anticipate changes in trends. When momentum changes, it is the first sign the trend falters. As such, if traders know in advance when this happens, they will position accordingly. The Chaikin volume indicator Forex traders use travels both in the positive and negative territory. The Forex volume indicator strategy is to buy or sell when it crosses from positive to negative or negative to positive territory. Divergences work with Chaikin too. However, because we already showed how a divergence with a Forex volume indicator works, we’ll focus on the crossing strategy. When applied on a chart, this Forex volumes indicator looks like above. Totally different than a volume indicator mt4 trading platform offers. As explained earlier, the idea is to buy or sell when the Chaikin crosses the zero level. But, it gives multiple signals. Many of them, fake ones.

How to Filter the Chaikin Volume Indicator’s Signals. The answer comes from adding levels to it. Like any Forex volume indicator mt4 offers, the Chaikin can be edited. To filter fake signals, traders follow several steps. First, they define the area surrounding the zero level. Or, the area of interest. Second, they look when the volume oscillator breaks out of it. That’s the market direction. Finally, they only take the signals in the direction of the previous break. They simply ignore the rest. Let’s have a look at the chart above and interpret it. That’s the EURJPY four-hour time frame. The defined area here is between -25k and +25k. A break above or below the two lines defines the market. We should use that break to filter the signals. As such, on the left side, the Chaikin Forex volumes indicator spikes above 25k. That’s bullish. Traders only buy the cross above the zero level.

On the other hand, when the oscillator dips below -25k, a bearish environment starts. Because the Chaikin did that, from that moment on, traders only sell. No one is interested in buying any more. Volume analysis and interpretation open the gates to various opportunities. Traders look to form an idea about what professionals do. That’s when the VSA kicks in. The best volume indicator mt4 trading platform offers interprets time too, not the only price. That’s why traders use the TVS as explained in this article. Yet, no matter the volume indicator, the strategy is the same. To find the best places to sell or buy a currency pair. While no Forex volumes indicator shows the total volume, it offers an idea about it. Hence, traders use them with a great deal of success.

There’s no strategy better than other. Volumes are relative, especially in the Forex market. But, if anything, they represent one of the few situations when traders can spot a move before happening. To be clear, price action tells much about a future move. When bullish price action comes with volume, traders pay attention. When volume lacks, everyone looks to fade the move. Many traders use no volume trading strategies at all. They simply add the volume indicator mt4 on a chart. And, analyze the spikes. As such, they use the volume as a confirmation for their strategy.

In other words, some trades are simply scrapped if there’s no volume. Or, if the volume is on a falling path. On the other hand, if the volume is on the rise, it simply reinforces a trade. Everyone wants to trade in the same direction as the big guys trade. That’s why the Forex volume indicator is so popular among Forex traders. Especially among retail ones. GET STARTED WITH THE FOREX TRADING ACADEMY. Damyan is a fresh MSc International Management from the International University of Monaco. During his bachelor and master programs, Damyan has been working in the area of financial markets as a Market Analyst and Forex Writer. He is the author of thousands of educational and analytical articles for traders. When being in bachelor school, he represented his university in the National Forex Trading Competition for students in Bulgaria and got the first place among 500 other traders. He was awarded a cup and a certificate at an official ceremony in his university. Using Volume to Win 75% of Trades. By: Huzefa Hamid. For a currency to be traded and for its price to move from one level to another, volume is required.

Or put another way, volume is the gas in the tank of the trading machine. However, volume has often been overlooked in the study of Forex charts. The focus has been more on price action alone. Why is volume important to understand? Volume is required to move a market, but it’s a particular type of volume that really matters: institutional money, or “Smart Money”, which is large amounts of money being traded in a similar way, thus affecting the market greatly. Only volume shows when price is being affected by this type of activity. Knowing how institutional money operates, we are able to track those traders and trade along with them, so that we’re swimming along with the proverbial sharks rather than being their next meal. Is Forex volume reliable? There is a common misconception that volume cannot be used reliably in Forex trading for two reasons: firstly, there is no central exchange and therefore no official volume data. Secondly, when you’re looking at volume data on your Forex platform, you’re actually seeing “tick volume”, and not actual volume traded, such as the volume with a stock chart. “Tick volume” measures the number of times the price ticks up and down. This is an excellent indicator of the strength of activity in any given bar. But also, the correlation between tick volume and actual volume traded is incredibly high. In 2011, Caspar Marney, head of Marney Capital and ex-UBS and HSBC trader, conducted an analysis of actual volume and tick volume in Forex. He used data from eSignal, EBS and Hotspot. For the pairs he studied, he calculated the correlation between tick volume and actual volume is over 90%. So the question is: How do we go about tying in volume with price action?

The study of volume with price started in the early 1900s with a trader by the name Richard Wyckoff. His research, then known as Wyckoff Analysis, developed into what is known today as Volume Spread Analysis (or “VSA” for short). Not all VSA traders or techniques are the same. Some are incredibly software driven and complex, whereas I like to keep it simple. This simpler approach yields results. Experientially speaking, a success rate of 75% and more is not uncommon with very few consecutive losses. A simpler approach is reflected in the charts. We have price candles, volume bars, and. that’s it! We use the 50% & 61.8% Fibonacci lines and simple supportresistance to help pin entries, but nothing more. 1. Institutional money, or “Smart Money”, is necessary to move a market and is revealed in the volume bars 2. Forex tick volume can be read as an accurate indicator of institutional or Smart Money strength 3. VSA, when it’s kept simple, can be applied (and taught) more easily with win rates of 75% and more. In the next article in this series, we’ll look at some examples of VSA setups that we use to give us clean entries. Huzefa Hamid is the co-founder of TheForexRoom. com a service that calls live trades to captures dozens of pips daily with low drawdown.

Send me an email on [email protected] com and I can fill you in on some of the progress we've made with volume following this article. Huzefa November 2012. Thanks for sharing, waiting for your next article in this series! nswpro October 2012. Registration is required to ensure the security of our users. Login via Facebook to share your comment with your friends, or register for DailyForex to post comments quickly and safely whenever you have something to say. 3 Ways to Improve a Strategy Using Real Trading Volume. Your Forecast Is Headed to Your Inbox. But don't just read our analysis - put it to the rest. Your forecast comes with a free demo account from our provider, IG, so you can try out trading with zero risk. Your demo is preloaded with ?10,000 virtual funds , which you can use to trade over 10,000 live global markets. We'll email you login details shortly. You are subscribed to Rob Pasche.

You can manage you subscriptions by following the link in the footer of each email you will receive. An error occurred submitting your form. Please try again later. Using volume to confirm breakouts Using volume to confirm trends Using volume to identify reversals. For traders coming from other markets, you know the importance volume has when making trading decisions. But for years, volume has been more or less rejected by Forex traders because it has been so hard to come by. There is no central exchange for currency transactions, so there is no perfect way to measure the amount of volume actually being traded. But with FXCM's Real Volume indicator, we can now get a sense of the amount of trading volume that is occurring on all major pairs. This is great for Forex traders, because we can now add volume analysis to our trading arsenal. In this article, we will learn 3 ways we can use volume in 3 different types of trading situations. Volume Can Confirm Breakouts. One of the greatest fears for breakout traders is encountering a false breakout. This is when price breaks a major support or resistance level, but then crosses back to its original side.

To mitigate falling for a false break, traders often wait until the current candle actually closes beyond the support or resistance level before placing a trade. This is a good technique. But another way we can confirm a breakout is by using volume. During a breakout, it is common to see a spike in volume. An increase in volume represents a larger amount of participants that "agree" with the breakout that is occurring and can actually act as confirmation that price could continue to move in the direction of the breakout. For an in-depth discussion on using volume to confirm breakouts, I recommend reading my previous article . But for a quick example, I have copied the chart we see below. Learn Forex: Volume Steady During False Breaks, Spikes During Real Breaks. (Created using Marketscope 2.0 charting package ) The 3 horizontal lines represent support and resistance levels that have been drawn based on swing highs and swing lows, and the red and green boxes represent times when price broke through those levels. However, not all of these breakouts had price follow through. Some of them were false breakouts. We can see that the two breakouts that could have resulted in great breakout trades, occurred when volume was dramatically higher than the candles around them. If we only trade breakouts when volume is elevated, this could increase our likelihood of finding better opportunities.

Volume Can Confirm Trends. Our next use for volume is valuable for traders that trade trend strategies. I already mentioned earlier how an increase of volume means there are a greater number of market participants in agreement about the price movement it coincides with. The same applies when market begins trending in a primary direction. During a strong trend, we commonly see volume increase when price is moving in the direction of the trend, and volume decrease when price is moving counter to the trend. When this occurs, it can act as a signal to traders that the trend is more likely to continue. The greater the disparity in volume during trend and countertrend moves, the stronger the trend. In a previous article , I go more in depth into looking for these opportunities and I've pictured one of these opportunities below. Learn Forex: Volume Increasing with Trend, Decreasing When Countertrend.

We can see that each time price is moving up (in the direction of the trend), volume is increasing, and when price is moving down (countertrend), volume is decreasing. If we find this on our own charts, we should feel more confident placing trades that are in the direction of the trend until we see increased volume during a countertrend move (or breakout). Volume Can Identify Reversals. The final situation when volume can be helpful is during potential reversals. Playing off the previous chart when we had a strong trend, trends will not last forever. At some point, trends will always reverse. But timing a reversal can be very difficult and very costly when we are wrong. The way that volume can be used to assist us in identifying reversals, is by looking for times when volume is decreasing at the same time that the trend is beginning to stall. Learn Forex: Volume Decreases While Priced Tested Resistance, Then Reversed.

In the chart above, we see an uptrend in a stalling pattern where price is not able to break to a new high. During this sideways movement, volume begins to dip lower and lower which could indicate that traders are uncertain that the uptrend will continue. As soon as we see price break to a new swing low, we see volume sky rocket, confirming the reversal. For more information on using volume to identify reversals, click here . ---Written by Rob Pasche. Interested in learning more about Forex trading and strategy development? Signup for a series of free guides, to help you get up to speed on a variety of trading topics! Register HERE. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

Forex Volume Indicators Interpretation. Professional and senior traders believe that volume doesn’t make sense in forex trading, because this market is really different from stock market. Volume makes a lot of sense in stock market, because the number of offered stocks, supply and demand is completely clear for each company’s stocks, but it is a different story in the currency market. I had to write an article about volume in forex, because it seems some companies are working on it and are trying to offer some volume indicators that may work on forex market. Although I don’t believe they can do it, and they can offer something that reflects the reality, as many of you ask about volume and are using it on your charts, I am going to clarify a few things about it. I am not saying there is no such a thing called “volume” in forex market. Any market has a volume. What I am saying is that it is not possible to determine volume in forex market accurately and precisely, simply because forex market is not a centralized market. If you are a regular investor in the markets then, there are some keywords that you could not have missed. ‘Volume’ is one such word. Be it equities, derivatives or currency trade, volume is an important indicator. From signalling the trend to setting the price, volume is the best friend an stock market investor can strive to have in the market place. So let’s understand a little more and see whether you can use this tool in furthering your currency trade and getting the maximum return on your investment, or not. Every day a large number of trades are executed in the market.

On a particular entity when a large number of trades happen or essentially that which sees a high volume trade, the price determination is perceived as more accurate. In contrast when only few trades are executed on scrip, the price determination happens via a much lower base of individuals, hence consensus for the given price is seen as relatively low. Thus, Volume in one word measures the market worthiness of a trade. Thus, a sudden spike in volumes within a short time can signal or prepare a trader for an out of the ordinary move or sudden knee jerk reaction based on some news or related development. Difference Between Forex & Equity Volume. Now you must be thinking a volume is volume, how can equity or forex trade make any difference to volume or its interpretation? Well it does! In the case of equity trade, ever share trade accounts for a separate entity in the total volume trade, however forex trading happens a little differently. It is impossible to keep track of the contracts traded through a given day world over. The easiest option in this case is, volume is derived from the number of ticks or the change in prices through the course of the session on a particular day. Certain specific numbers of contracts need to be signed for a move in price so, therefore, every tick in the price of a currency pair represents this amount or volume. Thus, we can deduce that volume plays a key role: It acts as a corroborative evidence of a change in market trend or specific direction in markets Price changes can be confirmed with the help of volume A sudden spike or fall in average volume is one of the best indicators of a change in sentiment Also, sudden surge in volume could also signal an upcoming event or expected policy action Volumes are also the earliest indicators of the beginning of a specific price change Higher volumes during an uptrend confirm the bullish tone in the market Higher volumes during a downtrend signify the bearish undertone in the market Low volumes during a price upswing indicate uptrend weakness. Types Of Forex Volume Indicators.

The volume can be interpreted in various ways to facilitate accurate interpretation of the market trend and technical analysis of the trends that are underway or that need to be predicted: AccumulationDistributor Indicator. This volume based technical indicator is used to determine the flow of money into an asset class. This is essentially calculated by comparing the closing price with the intra-day highs and lows and deriving a weighted average with respect to the trading volume. This is a tool that is used to confirm a trend or identify the turning point of a specific trend in the forex market. If the AccumulationDistribution line is rising on the charts, it indicates a rise in prices In contrast if the AD line is falling, a downtrend in the specific currency trade can be confirmed You get a sign for bullish reversal if the AD line is rising despite fall in prices Meanwhile falling AD line along with increasing prices indicates bearish reversal. Money Flow IndexMFI Indicator. This is again an indicator based on forex trading volumes. This technical indicator gives us an idea of the intensity of money flow in specific assets by comparing the extent of rise or fall in prices in relation to the trading volumes. This will give a sense to traders & investors if a particular currency pair is overbought or oversold. For example in case of dollar-euro trade, if the MFI climbs above 80, it will be considered overbought, once this indicator crosses the overbought zone, you will get a sell signal Conversely, if the MFI slips below 20, it will be considered oversold, and a buy signal is imminent once it crosses the oversold zone In case you have a rising MFI and decreasing price movement signals weakening downward trend When the reverse happens that is you get a falling MFI with increasing prices, it signals a weakening of the uptrend in the market and again a cue to sell. On Balance Volume Indicators. This is again a volume based technical analysis tool. It basically gives you an idea of the total deals struck in relation to price movement of a specific asset under consideration. It is a handy tool for trend confirmation and point out reversal points.

A rising line stands for uptrend while a downtrend is confirmed by a falling line A fall in prices coupled with a rising OBV line signals weakening of a potential bullish reversal The contrary or a weakening of the bearish trend is confirmed by a falling OBV line with the rise in prices. In recent developments, some brokers are likely to launch some volume indicators. According to what they say, it is expected to track volumes real-time and tests on the same are underway currently. Once finalized, this will be able to provide real currency volume using the broker’s retail platform. To start with, this will be tracking the top 14 currency pairs. This indicator is path breaking in the sense it will be able to provide data on the volume as well as the exact number of transactions on a currency pair. Thus, far we only have indicators that give out the tick volumes for forex trading. However, this real time volume can provide that edge to your trading practices and confirm price movement a lot more precisely. This data will also be available to the public via the internet. How Accurate These Indicators Can Be? Broker can only see the volume of the transactions done through its own platform.

It knows nothing about the whole currency market world’s transactions. In case the broker is too big and popular, the volume of the transactions it handles can be a reflection of the currency market transactions. But there is one problem here. A retail broker handles the transactions for retail traders. What about the main participants of the currency market that perform over 80% of the forex market transactions? These participants are the ones who make the price move and form buysell signals and trade setups, not retail traders and retail brokers. Even liquidity providers cannot provide an accurate estimation about the global forex market transactions. The conclusion is that brokers can create some innovative forex volume indicators to attract more clients and customers. However, these indicators simply mean nothing. They just show the volume of the transactions handled through the broker’s platform. That is all. Now that you know what volume is and what volume indicators do, let me tell you something that makes your life much much easier. You want the volume indicators or any other indicators to trade forex and make money, right? The question is do you really have to use forex volume indicators to be profitable and make money through forex trading?

The short and simple answer to this question is “No”. You already have a great indicator that shows the best time to enter the market. It is a real time indicator that reflects the real forex market activities that makes the price move and form ups and downs, and buysell signals. It is the candlesticks. If you learn how to use the candlesticks, you don’t have to be worried about anything else, simply because candlesticks reflect the real, accurate and precise market events, done by all the market’s participants, not only a portion of them. If you like to learn how to use candlesticks to see the strongest trade setups and buysell opportunities, here is the best place. Make your learning journey as short as possible and become a profitable forex trader within the shortest possible time, risk free. Don’t risk any time and money to become a profitable forex trader. You can do it for free and without spending and losing any money: Become A Profitable Forex Trader In 5 Easy Steps. Just before you go, did you check This System? Make sure to do it now, otherwise you will regret.



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