The problem is the same as any volume indicator: is the volume reliable? Even if not, like in the case of 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. Hence, this is bearish. This is opposite to 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 offers a clue that the market is geting ready to jump. So, it did. 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. Because of these characteristics, it mirrors price action. Hence, when a divergence forms, it is a powerful reversal signal.

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. It is a combination between the MACD and the momentum oscillators. Traders use it to anticipate changes in trends. When momentum changes, it is the first sign that the trend is faltering.

As such, if traders know in advance when this will happen, they will position accordingly. The Chaikin volume indicator that 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. When applied on a chart, this Forex volumes indicator looks like the one above. Totally different from a volume indicator that the 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. 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. Finally, they only take the signals in the direction of the previous break. They simply ignore the rest. 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.

Traders only buy the cross above the zero level. On the other hand, when the oscillator dips below k, a bearish environment starts. The Chaikin did that and from that moment on, traders only sell.

No one is interested in buying anymore. Volume analysis and interpretation open the gates to various opportunities. Traders look to form an idea about what professionals do. The best volume indicator that the mt4 trading platform offers interprets time too, not only the price. To identify average volume, add a period moving average indicator.

If the volume bar is close to the moving average line, then it will be considered as an average volume bar. A volume bar below the moving average line is a low volume bar and above the MA line is a high volume bar. If the volume is unexpectedly higher than all the other volume bars at least the last 61 bars then it will be considered as a very High Volume bar. It reveals a lot of information regarding the activity of professional traders. The volume bar corresponding to bullish candlestick is called bullish Volume.

In the bullish trend , bullish Volume bars are greater than bearish volume bars. The volume bar corresponding to bearish candlestick is called bearish volume. In the bearish trend , bearish volume bars are greater than bullish Volume bars. Chart reading using VSA is the most important topic. According to the VSA method, if spread size is average and the size of the volume bar is greater or lesser than average, then there is smart money in simple words.

A low volume indicates that smart money is not interested in buying anymore. High Volume means big traders are selling to retail traders by buying. The market moves in the form of repetitive cycles. After one cycle completes, then the next will start. You can also name it market swings. In the same way, volume bars progress in the form of cycles. One market cycle represents one volume climax. This is helpful in identifying market cycles. Volume spread analysis working is on the basis of four market phases.

According to VSA, a bearish candlestick represents the strength of the market, while a bullish candlestick shows weakness. This is opposite to what retail traders think bullish candlestick shows strength and bearish candlestick shows weakness. If the price is in a bearish trend then big players have already sold from higher price, and it will continue until markdown phase completion.

After the markdown phase, the accumulation phase starts, now big players are buying at wholesale rate. Then mark-up phase will be complete. In the distribution phase, big players will sell at higher retail prices.

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.

a Volume increases compared to the day before but closing prices are lower b Price hardly moves up, even though volume has increased. If the indicator is rising then it indicates accumulation buying of the currency. VOLUME: The most logical place to start is the volume indicator. 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.

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 bearish or bullish depending on whether the day has been bearish and bullish. 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. 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 best volume indicator used to read a volume in the Forex market is the Chaikin Money Flow indicator CMF. 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.

Various volume trading strategies have appeared and evolved in time. While Forex volume is a tricky concept, Forex volumes indicators do exist.

A volume indicator that 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 definitely represents something. Despite such volume, the market is also volatile. Or, maybe, because of it. This article aims to cover the most important ways to use Forex volume.

Therefore, it will deal with the following:. For the Forex trader, volume trading strategies are a bit more complicated than others. As such, the volume indicator the mt4 platform offers is subject to interpretation. But, there are multiple Forex volumes indicator strategies. 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.

At least the classic one is. 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 have 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, that differ strongly from 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 that traders look for spikes in volume. They usually come at turning points. It was range bound for several years.

As a result, 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. 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.

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: it shows a breakout before it happens. This makes it difficult to read a chart pattern. Trading has 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 has changed too. The classic volume indicator mt4 trading platform offers, is not enough anymore. Volume Spread Analysis, or VSA as it is also known is a powerful trading theory, deals with interpreting candlesticks based on their volume.

In fact, the term VSA was first used by Tom Williams to describe the trading methods he used. The subject is so vast, it is difficult to find a starting point. 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 the 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 did the same as professional traders, they would 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 then trade accordingly? The problem is the same as any volume indicator: is the volume reliable? Even if not, like in the case of 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.

Hence, this is bearish. This is opposite to 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 offers a clue that the market is geting ready to jump.

So, it did. 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.

For instance, the AD methodology mentioned in the paragraph above includes volume as part of its basic parameters. It reveals a lot of information regarding the activity of professional traders. The answer is that the other parties involved make money. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Volume Spread Analysis, or VSA as it is also known is a powerful trading theory, deals with interpreting candlesticks based on their volume. 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.

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