How To Trade Forex With Volume Indicator

If you merchandise stocks, you have the information about the volumes of trading provided by a stock exchange. This info allows you to run across whether market players dorsum up a price'southward trend or not. On the currency market, the situation is dissimilar just traders can still get insights from volumes.

Tick volume

Forex market is decentralized so it's not possible to count all the contracts and their sizes similar it's done at stock markets. Equally a consequence, Forex traders use indicators of tick volume.

A tick is any unmarried change or move in the quote up or down. MetaTrader measures the number of ticks during a single period of time. Thus it'south possible to come across how actively the market place traded in particular moments. In other words, we don't know whether in that location were 500 or 500,000 orders inside a certain menses, just we know how many ticks the price moved. This is what a tick volume is. It'due south important to understand its nature.

How to implement tick book

MetaTrader offers several indicators of tick volume. To apply them, click "Insert", and so "Indicators" and choose "Volumes". There are four indicators:

1. Volumes

The indicator shows the number of price changes (ticks) within each period of a selected timeframe. Book bars are painted green if they are bigger than the previous ones and red if volume declines.

2. On Balance Book (OBV)

The indicator is represented in form of a line. If the close price of the electric current candlestick is higher than that of the previous ane, the electric current volume is added to the previous OBV and the line goes up. If the electric current candlestick close price is lower than of the previous one, the current volume is subtracted from the previous OBV making the indicator go downwardly. It's assumed that OBV changes precede price changes, so it tin provide signals.

3. Coin Catamenia Index (MFI)

The indicator shows the rate at which money is piled into an asset and and then withdrawn from it. Regard it as a version of RSI that takes into account volumes.

four. Accumulation/Distribution

This is another indicator calculated on the basis of both toll and book. The higher the book, the greater the contribution of the price change (for this menstruum of time) volition make to the value of the indicator.

MetaTrader

Using volumes for technical analysis

Volume indicators can perform very useful tasks:

i. Measure the strength of a trend

A trend is strong when it's confirmed past ascent volume because it means that the market place'southward involvement in this trend is high. So, in an uptrend, volume should increase when the price is moving up and decrease when the price is moving downwards, while in a downtrend this means increased volume when the price is moving down and decreased volume when the toll is moving upwards.

uptrend on the candlestick chart

At the moving picture above you tin see that volume declines during corrections in an uptrend. In the final office of the chart, the new loftier is non confirmed past volume. It means a likely reversal downward.

2. Spot reversals early on

It'south always difficult to distinguish betwixt a reversal and a correction at an early stage. Volume indicators help to do information technology sooner and join the new tendency as early as possible.

Volume indicators at an early stage of reversal

The price formed a "Head and Shoulders" pattern. Volume was low during the top and even lower at the 2nd shoulder: a confirmation that the market had no more than forcefulness to go upwardly.

If at that place's a deviation between the price and the volume indicator, it'southward a signal of a potential reversal of the existing tendency.

3. Confirm a breakout

Volumes are usually low during a consolidation period. If a breakthrough of a range is accompanied past a spike in volume, in that location'south a higher take a chance that this is a existent and not a faux breakout.

real breakout

Book rose at the moment when the price went above a resistance level. This helped the price continue moving in the direction of a quantum.

4. Identify strong areas of support/resistance

The areas where the price is trading with high volumes may represent significant obstacles on the way of the price and, consequently, good entry and leave level for traders.

Decision

Volume indicators in MetaTrader are not contained signals providers but they tin can be used for confirmation. After all, the dynamics of volume tells us better than anything how active the trading is. This is a unique cognition which is not actually provided past other indicators. Every bit a result, the indicators of volume volition surely brand a great contribution to your trading system.