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Volume in forex is better

volume in forex is better

The higher the volume during a price move, the more significant the move and vice versa - the lower the volume during a price move. It is the number of units, shares, or contracts that change hands between a buyer and a seller. The more actively traded an asset is, the higher the volume will. The more volume, the easier it is to buy or sell. If there are fewer buyers and sellers, you are more likely not going to get the price you wanted. Volume is. WORLD FOREX PROFIT LAUNCHER Click the Operation Flow mean, I. Thickness of must use. Read these different file table to free Remote an add-on.

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Increasing price and decreasing volume might suggest a 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. 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 signals 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 by using the other volume guidelines. Volume can be 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. After a long price move higher or lower, if the price begins to range with little price movement and heavy volume, then this might indicate that a reversal is underway, and prices will change direction. 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 a lack of interest and a higher probability for a false breakout. Volume should be looked at relative to recent history. Comparing volume today to volume 50 years ago might provide irrelevant data.

The more recent the data sets, the more relevant they are likely to be. Volume is often viewed as an indicator of liquidity , as stocks or markets with the most volume are the most liquid and considered the best for short-term trading; there are many buyers and sellers ready to trade at various prices. Volume indicators are mathematical formulas that are visually represented in the most commonly used charting platforms. Each indicator uses a slightly different formula, and 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 to choose from, and the following provides a sampling of how several of them can be used. On-balance volume OBV is a simple but effective indicator.

Volume is added starting with an arbitrary number when the market finishes higher or 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.

Rising prices should be accompanied by rising volume, so Chaikin Money Flow 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 closing prices 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. Fluctuation above and below the zero line can be used to aid other trading signals.

The Klinger oscillator sums the accumulation buying and distribution selling volumes for a given time period. Daily volume is the most common time frame used when discussing stock volume. Average daily trading volume is the daily volume of shares traded, averaged over a number of days; this smooths out days when trading volume is unusually low or high.

Popular volume indicators include three mentioned above—on-balance volume OBV , Chaikin Money Flow , and Klinger oscillator—as well as the volume price trend indicator and Money Flow Index. Volume patterns provide an indication of the strength or conviction behind price advances or declines for a stock or sector or even the entire market. An advance on increasing volume is generally viewed as a bullish signal, while a decline on heavy volume can be interpreted as a bearish signal.

New highs or lows on decreasing volume may signal an impending reversal in the prevailing price trend. In the case of a pullback in a stock or market, the volume should be lower than it is when the price is moving in the direction of the trend, typically higher.

Volume is a handy tool to study trends, and as you can see, there are many ways to use it. Basic guidelines can be used to assess market strength or weakness, as well as to check if volume is confirming a price move or signaling that a reversal might be at hand. Indicators based on volume are sometimes used to help in the decision process. In short, while volume is not a precise tool, entry and exit signals can sometimes be identified by looking at price action , volume, and a volume indicator.

Gallant, A. Ronald, Peter E. Rossi, and George Tauchen. Edwards, Robert D. Bassetti, and John Magee. Technical analysis of stock trends. CRC press, Joseph E. Chaikin Analytics. Technical Analysis Basic Education. Trading Strategies. Using volume to define trading decisions makes sense if it is used as a confirmation. Here are its primary advantages:. Read more information on how to interpret divergence. 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. 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:. 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.

If the indicator is rising then it indicates accumulation buying of the currency. This tool calculates the number of ticks in 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. OBV marks the particular volume of the day as bearish or bullish depending on whether the day has been bearish and bullish. The total then indicates the overall sentiment of the market.

I recommend going to this link to read the steps yourself. The MFI is calculated by:. The formula is very simple, yet provides various interpretations in combination with volume. There are 4 different combinations based on MFI and volume. 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. The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world.

The reason the Chaikin Money Flow is the best volume and classical volume indicator is that it measures institutional accumulation-distribution. Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line. The difference between the Chaikin Money Flow and the standard volume is the math underlying each indicator.

Secondly, the trading volume analysis is quite different as well as how the trading signals are interpreted. On the one hand, volume simply measures how much a given currency pair has traded over any given period of time. Volume is used to measure the strength and weakness of a trend. As a general rule, a strong trend should be accompanied by rising volume. At the same time, a sharp rise in volume can also signal the potential end of a trend. While you can tweak the indicator settings and you can try different configurations, you need to keep in mind 3 things:.

The main advantage of the Chaikin Money Flow indicator is that the indicator can assess the buying pressure vs the selling pressure of your favorite currency pair stock, ETF, cryptocurrency, futures market, etc. With the CMF volume indicator, we can measure the amount of money coming into the market and its impact on the actual price.

The CMF volume indicator can be used to confirm the strength of the trend, the accuracy of a breakout, trend reversals, false breakouts and so much more. Gaining an understanding of the different applications of the volume indicator in trading can help you improve your results. The Chaikin Money Flow indicator can also be used to confirm the strength of a breakout.

If the CMF volume reading is above zero when we break a resistance that is viewed as buying pressure. In this case, the breakout has higher chances of success. Conversely, if the CMF volume reading is below zero when we break a support level that is viewed as selling pressure.

We can also use the CMF volume readings to spot false breakout signals. If we break above resistance but we have negative readings on the CMF indicator that is a potential false breakout. Conversely, if we break below a support level but we have positive readings on the CMF indicator that is a potential false signal.

Usually, in both rising and falling markets during the last stage of the trend, we can see spikes in volume and volatility. These are trade secrets that you wish you had been taught. The Chaikin indicator will dramatically improve your timing and teach you how to trade defensively. Before we go any further, we always recommend taking a piece of paper and a pen and take notes of the rules of this entry method.

You can also read a million USD forex strategy. Volume trading requires you to pay careful attention to the forces of supply in demand. Volume traders will look for instances of increased buying or selling orders. They also pay attention to current price trends and potential price movements.

Generally, increased trading volume will lean heavily towards buy orders. These positive volume trends will prompt traders to open a new position. You also need to pay attention to the relative volume —regardless of the raw number of transactions occurring in a trading period.

Ask yourself how is the prospective asset performing relative to what was expected? When the Volume goes from negative to positive in a strong fashion way it has the potential to signal strong institutional buying power. When the volume indicator Forex goes straight from below zero to above the zero line and beyond, it shows accumulation by smart money.

Chances are that institutions have more money and more resources at their disposal. Odds can be stacked against you, so if you want to change that, just follow the smart money. Once we spot the elephant in the room, aka the institutional players, we start to look for the first sign of market weakness. Here is how to identify the right swing to boost your profit. Second, as the volume decreases and drops below the zero level, we want to make sure the price remains above the previous swing low.

This will confirm the smart money accumulation. The Volume strategy satisfies all the required trading conditions , which means that we can move forward and outline what is the trigger condition for our entry strategy. Now that we have observed real institutional money coming into the market, we wait for them to step back in and drive the market back up.

When the Chaikin indicator breaks back above zero, it signals an imminent rally as the smart money is trying to markup the price again. We would need to wait for the candle close to confirm the Chaikin break above the zero line. Here is an example of a master candle setup. This brings us to the next important step. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss. Never underestimate the power of placing a stop loss as it can be lifesaving.

Never use a mental stop loss, and always commit an SL right the moment you open your trades. Trading with a tight stop loss can give you the opportunity to not just have a better risk to reward ratio, but also to trade a bigger lot size. Last but not least, we also need to learn how to maximize the profits with the Chaikin trading strategy. Once the Chaikin volume drops back below Use the same rules for a SELL trade — but in reverse. In the figure below, you can see an actual SELL trade example.

Any market moves from an accumulation distribution or base to a breakout and so forth. This is how the markets have been moving for over years. Smart money always seeks to mask their trading activities, but their footprints are still visible.

We can read those marks by using the proper tools. Here is another strategy on how to apply technical analysis step by step. Make sure you follow this step-by-step guide to properly read the Forex volume. The Chaikin indicator will add additional value to your trading because you now have a window into the volume activity the same way you have when you trade stocks.

Please leave a comment below if you have any questions about the volume indicator Forex! Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders! We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more.

Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow. Is there a time limit on how fast the smart money build up should be? In your example it only takes a few days. Would a run up of say weeks still be a valid signal?

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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.

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:. 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:. 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.

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 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. 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. 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. Broker can only see the volume of the transactions done through its own platform. Then, towards the beginning of points 1 and 2 below , we saw two big spikes in volume, during two down days. I actually bought this stock because the US government basically told everyone that they would not let Citigroup fail. However, at point 4, there was another huge spike in selling volume, but price failed to drop significantly.

That was a sign that most of the sellers were out of the stock, at that point. So that is how we can use volume to show us when a stock does not have any more buyers and might be ripe for a purchase. Next, volume can give you hints as to when a stock is being possibly accumulated.

This is one example of how we can see volume increasing, while price is basing. In the basing pattern, there are more green bars than red bars in the volume indicator. So this could be a good hint that price might start to turn around soon. The general idea is that if you see volume increasing in a trend, it is likely that you will continue to see price move in the same direction.

It makes sense because as a trend gets going, more people need to pile in, to keep the trend going. Here is an example of a trend in crude oil where volume increases in an uptrend. Although this is futures and not stocks, the same principle applies. Once volume starts to dry up, the trend reverses, soon after. Alright, now that you have an idea of how volume can be used in stock trading, let's jump over to Forex trading to see if these same principles apply. After reading the previous examples, you are probably ready to throw up a volume indicator on your FX charts.

Since there isn't a primary exchange that all transactions run through, there is no way to count how much currency is being traded at any one time. So what you are seeing on your FX charts is only the volume that your broker sees. This chart uses Oanda data and shows that the current volume is 8, currency units. But when we look at an FXCM chart, we see a much different picture. This chart shows a volume of 50, currency units.

If you look at the relative volume, the graphs are pretty similar, but they are not exactly the same. For example the right side of this chart shows a big spike. However, on the Oanda chart, there is actually a decline in volume. Well, let's take a look at a few example to see if it could useful, even if you are only getting part of the picture.

As you can see, price moved down on a lot of volume, but stopped short of a previous support point. After this spike in volume, price started to move up. This is an example of a pretty long downtrend, followed by a basing pattern and an increase in volume.

The volume increase could have been a clue that accumulation was taking place. Price shot up, soon afterwards. Here is an example that I found of a strong trend being reinforced by volume. As we saw with the oil example above, when volume starts to decrease, price starts to drop. From those previous FX examples, volume looks like it could be a fairly useful predictor of future price movement. But hang on for a minute, those were a few well-chosen examples. The differences in market open times and volume are reflected in the intraday volume spikes.

Of course, this makes it harder to read than intraday stock volume. So volume might be able to give us some hints about where price is likely to go next. However, since we are only seeing volume from one broker, it is tough to trust the numbers to give us an accurate picture of how much currency is being traded across the entire market.

If you want to test a trading strategy that includes volume as a trading signal, be sure to use data from the broker that you will be trading with.

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Volume in the Forex Markets - Useful or Not? ☝️ volume in forex is better

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