How to trade forex using volume indicator

OBV is a simple but effective indicator. Volume is added (starting with an arbitrary number) when the market finishes.
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If you are interested in trading volume then you have to pay extra attention to the most important thing in the market which is called the forces of supply and demand. Pay extra attention to current market trends and try to predict the directions of these trends as well to give you an edge. Increased buying and selling are where all the action is as an increase in trade volume is generally goes in the direction of buy orders which encourages traders to open new positions.

The next thing that requires your attention is the relative volume.

Trading with MetaTrader's Forex Volume Indicator

Always try to estimate what the performance of the asset is as compared to its expected performance. At the end of the day, a volume indicator boils down to a combination of mathematical formulas and equations that are represented visually in the form of charts.

Different indicators used slightly altered formulas to try to compete with each other. At present, there are three famous volume indicators. Developed by Marc Chaikin who is an accomplished trader himself, CMF indicator works by measuring institutional accumulation as well as distribution. Traders like to use this particular volume indicator due to its oscillations or to seek out divergence.

This volume indicator was developed by a person called Stephen Klinger who wanted to build an indicator to predict and analyze the long-term trends of the market. The Klinger Oscillator works by comparing the volume of the securities and compares it with its price movement to give the result as an oscillator. This is easy to use and a simple volume indicator that was made by Joseph Granville. It works by analyzing volume flow to predict the ups and downs in stock price. Volume indicator forex is a surprising strong strategy that can help you with your trading endeavors effectively and there are numerous other ways to use the indicators to your advantage.

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The promotions offered by the site are highly speculative and their execution can lead to the loss of your entire capital. Sometimes traders get confused as there are several types of volume oscillator indicators. In the forex market, the price goes up when the buyers dominate the market and the price goes down when the sellers dominate the market.

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The volume oscillator indicator has the capacity to draw the attention of any unusual buying and selling activities in the market. In this indicator, price moves from the period of low volume activity to high volume activity and vice versa. Therefore, the ability to spot these activities can help traders to trade alongside the big players. High volume, either in the bullish or bearish side can generate trends or an indication of the change in the trend direction. Volume analysis can help you predict these trends before they are visible on the chart. There are several ways to trade forex using the volume oscillator indicator.

Of them, we will see some of the well-known strategies.

Forex volume trading indicator - what it does and how it works

In the forex market, breakouts have a higher failure rate. The reason behind this is that it is very easy to reduce the price from higher to lower instead of higher to higher.

Professional Trading with Volume. A Must See Video!

In any market, an increase in price reduces the interest of buyers. As a result, price falls higher to lower. Moreover, a breakout is just breaking below or above the recent high or low. There is no mystical Fibonacci level or a trendline. Therefore, it becomes harder for traders to determine the sustainability of any breakout.

A volume oscillator allows traders to know whether the breakout will sustain or not. Any breakout with higher volume indicates an involvement of smart money. Therefore, the breakout with higher volume will be successful and traders can enter the trade after some corrections with their trading strategy. In this chart, the volume oscillator got a bullish breakout after a correction. On the other hand, Price got a bearish rejection with a candle close in the same period.

This is a perfect example of identifying the trend reversal with a volume oscillator. However, you can find many unsuccessful breakouts that are also indicated by the volume oscillator. In this chart, price breaks out the resistance with a candle close. But as the movement was not supported by the Volume Oscillator, price reversed. After a long price move higher or lower, if the price begins to range with little price movement and heavy volume, 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 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 most commonly used charting platforms.


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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.

OBV is a simple but effective indicator. Volume is added starting with an arbitrary number 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.

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 upper portion of the day's range, and volume is expanding, the values will be high. 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. 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. Technical Analysis Basic Education. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page. These choices will be signaled globally to our partners and will not affect browsing data. We and our partners process data to: Actively scan device characteristics for identification.

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