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Volume Indicator Forex

current closing price

It is the equivalent of focusing on the next result instead of analyzing the process. All it knows is how many it moved, regardless of the fact if 100 trades were involved or 10,000. Was reminded today about the volume indicator, and thought this was in interesting pattern in Oil. The price very much likes to be range bound and channel sideways during the low volume periods, offering opportunity to trade as it breaks out up or down.


Initially, goods, and then the rest of the assets, were sold on the stock exchange by the principle of auctions, and the trading lot were rigidly standardized. In this case, a fixed trade with an optimal price was considered a trading tick, and a standard volume, respectively, was the tick volume . Traders aren’t always interested in all chart signals that signify the beginning of a new trend, regardless of whatever the volume indicator says.

For example, the signals are not distorted by the new releases. However, the price breaks through the local lows in the expanding formation, and the situation is the opposite in our example. The TrueT OBV Divergence analyzes the last 300 visible bars and paints diverging lines in the On Balance Volume window. A great benefit of this tool is the alert signaling divergence and many additional settings compared to the classical version. Entering, exiting, and avoiding moves in harmony with the institutional smart money, provides you with an edge that will minimise losses and maximise returns. Volume Analysis tracks the number of transaction per minute, hour, day or week and is used to compare with historical averages.

  • With a volume indicator, you can filter out signals with a higher probability from others.
  • When the Chaikin indicator breaks back above zero, it signals an imminent rally as the smart money is trying to markup the price again.
  • Experienced traders know that it’s dangerous to enter the market blindly.
  • Understanding volume indicators in Forex can greatly help them time their entries and exits.

Day trading is one of the most challenging ways to make money in the world. You’re trading against some of the smartest people on the planet – people who are smarter and more experienced than you. Investors Underground is the best community and has the best educational curriculum to learn day trading. Traders use volume to determine liquidity and to make trading decisions. If you do go short, be sure to watch out for a bounce around the primary volume support.

Confirm a breakout

Looking at volume patterns over time can help get a sense of the strength of conviction behind advances and declines in specific stocks and entire markets. The same is true for options traders, as trading volume is an indicator of an option’s current interest. In fact, volume plays an important role in technical analysis and features prominently among some key technical indicators.

When a market’s price reaches a support or resistance line, it could reverse, or it could breakout if the trend is strong enough. By taking a position as soon as the line is hit, traders can take advantage of the short-term euphoria that often comes when the market goes beyond these levels. 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.


This indicator was originally designed for work in the stock market, later, it has been successfully used by Forex traders to measure buying and selling volumes of various assets. The creator of this indicator believed that the main driving force in the financial markets is volume. Compared to other momentum indicators, the OBV is efficient in trading almost all Forex instruments.

Real Forex Volumes

They will be recalculated automatically after you enter new values into the table. With the help of these charts, you will be able to carry out the same analysis as in the trading terminal. The indicator looks like the simplest graph with a signal line where the trading volume is depicted. All volumes are compared against the average for the time period being assessed.


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 on little volume is not a strong signal. A price drop on large volume is a stronger signal that something in the stock has fundamentally changed. He has been a professional day and swing trader since 2005. Cory is an expert on stock, forex and futures price action trading strategies.

Is volume profile a good indicator?

If there is positive volume pressure, the curved line goes up following the price rise. Otherwise, if there is a negative volume pressure then the line goes down following the price fall and the ongoing trend is likely to continue. Later on, the On-Balance Volume indicator was developed by a prominent financial analyst, Joseph E. Granville. Granville believed the trade volume to be the main driver of the financial markets. He popularized the OBV technique in his book New Key to Stock Market Profits. Granville compared the trade volume to the steam that is driving the market engine.

For this reason, the MFI is sometimes referred to as the volume-weighted RSI. The negative OBV reading occurs when the indicator line goes down. A stop loss is set a little higher than the most recent local high . It is not convenient to calculate On Balance Volume manually.

The best indicator to apply to a volume trading strategy in the Forex market is the Chaikin Money Flow indicator . There is often a dramatic increase in volume at market tops or bottoms. It’s basically the market blowing out or exhausting, its remaining interest in price at that level.

What is volume indicator in forex?

Volume indicators are visual representations of the interplay between price action and volume. For many traders, since price action and volume make up 80% or more of their trading strategies, a good volume indicator or two is a critical component of their success. If the indicator values rise on an upward movement with more or less significant volumes and fall on a downward one, then it works correctly. However, it is recommended to use OBV index with other technical tools such as relative strength index, moving average, etc. When the current closing price is higher than the previous closing price, the current volume is added to the previous trading volume. When the current closing price is lower than yesterday’s close, the current volume is subtracted from the previous trade volume.

In intraday trading, you can spot divergences that signal the trend reversal of the daily volume. You can also use the OBV in day trading to confirm the trend continuation or the authenticity of the support and resistance levels breakouts. The only difference is in OBV trading in very short timeframes, where the signals are not that accurate because of the price noise. These indicators measure shares in the equity markets, contracts in the futures markets, and tick movements in the forex markets.

How to use On-Balance Volume indicator?

When the candlestick closes, we can exit the short trade and enter a long. Traders use the previous OBV breakouts to filter false signals and understand the positive and negative volume outcomes. A typical trading signal is the breakout of the support or resistance line. It signals the current trend is strong, and it should continue.

The volume indicator is a technical indicator for MT4, MT5, cTrader and various other trading software. Usually, these platforms have the indicator pre-installed, so there’s no need to download anything. In this guide, you will learn how to use Forex volume indicators for MT4 and cTrader platforms. What’s more, we’ll discuss the best approaches when using the indicators. Volume is closely monitored by traders to form predictions of upcoming trend reversals. For example, if bitcoin jumps 20% in one trading day after being in a long downtrend.

According to the creator, money flow persistence over 6 to 9 months evaluates accumulation or distribution by major funds and institutions. Most traders don’t need that information but CMF also reveals short-term money flow convergence-divergence when viewed with shorter time frames and settings. Chaikin Money Flow was created by Marc Chaikin in the early 1980s. The indicator measures accumulation and distribution of a security over time. This is an oscillator, with values ranging from +100 to -100 and a zero line that signifies neither accumulation nor distribution.