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? 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. As such, the volume indicator mt4 platform offers is subject to interpretation. But, there are multiple Forex volumes indicator strategies. This article aims to cover the most important ways to use Forex volume.
Therefore, it will deal with the following;. What you see in the spot Forex market is not the actual traded volume.
It is just the volume traded at your broker. 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.
Or, in plain English, it offers an educated guess about the total 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. As such, rising trading volumes signal bullish activity. And, of course, falling ones show weakness. Because of automated order types, the market makes different moves than before.
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. As such, their interpretation differs. Yet, all approaches work. 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.
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. The volume indicator mt4 trading platform offers can spot the start of a trend. 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. But, is this valid one hundred percent of the times?
Because volume is relative to the Forex market, the answer is no. The formula goes like this:. Therefore, it is no wonder trades look for spikes in volume. They usually come at turning points. It was range bound for several years.
Because of that, such an oscillator works with overbought and oversold conditions. 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. Don Worden wanted to see where the market has a large-lot activity.
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. This is the power of this Forex volume indicator: This makes it difficult to read a chart pattern. 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. It deals with interpreting candlesticks based on their volume.
The subject is so vast, it is difficult to find a starting point. Retail traders lose money on the Forex market. 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. 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. It starts from the assumption that professional traders leave footprints in volume data. As such, what if one can find them and trade accordingly?
The problem is the one of any volume indicator: 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: Hence, this is bearish. Opposite from the classic volume indicator mt4, VSA looks more similar to Japanese candlestick techniques. If the falling comes with lower spread and volume, the market is actually bullish. Buyers quietly step in. Hence, the market gets ready to jump. The declining volume together with the narrowing spreads offered a clue that the market gets ready to jump. Powerful volume trading strategies like this one show ideal conditions to enter a market.
Right before the breakout. 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. 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.
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.More...