Therefore to count volume in Forex the number of ticks/changes in price is used 1 tick measures 1 volume. The Forex volume cannot be measured precisely as it is done, for example, in the Equity market, where every share traded equals 1 volume, and selling 200 shares means 200 in volume.įorex by nature cannot count how many contracts and what sizes of contracts were traded at any given time because the market is wide and decentralized. To understand the nature of spike in volume before a trend reversal, traders need to know how the data for volume indicator is gathered in Forex. As you can see, after the correction happened, we saw a continuation down.Ĭorrelation between Volumes and Reversals Traders Workshop - For Real Success - You Need To Learn From The Best!Ĭomplete Trading School by Vladimir RibakovĪnother example but this time the down trend (the period marked between the vertical lines) comes with increasing volume. Notice the decrease in volume during corrections. Phase two showed progressively increasing volumes, creating a smooth up curve. That tells us that this trend is losing momentum and we can expect a reversal soon (which it actually happened afterwards). In the first phase on the image below (blue arrows) price is in a down trend, however, the volume is also decreasing. The price will either continue to decrease, but at a slower pace or start to rise. When the price is falling and volume is decreasing, the downtrend is unlikely to continue. Price may still attempt to increase at a slower pace, but once sellers get the grip on it (which will be signified by an increase in volume on a down candle), the price will fall.Ī downtrend is strong and healthy if volume increases as price move lower and decrease when it begins retracing upwards. When the price is going up and volume is decreasing, it tells traders that a trend is unlikely to continue. Volume helps to learn about the health of a trend.Īn uptrend is strong and healthy if Volume increases as price moves with the trend and decreases when the price goes counter-trend (correction periods). Small volume tells that there are very little participants in the market, neither buyers no sellers have any significant interest in the price. In addition, no financial institutions will be involved, thus a market is going to be moved only by individual traders and so the move will be weak. The last ones bring the highest turnover to the market, and if they are trading, it means the interest to the price at a certain point and/or to the trend overall is high. Large volume signifies that there is a large number of market participants involved, including financial institutions. Volume is the second most valuable data after the price itself. “Volumes is the indicator of the number of price changes within each period of a selected time frame.” Breaking Down Volumes Climaxes are usually accompanied by extreme sentiment readings, either mass euphoria at market peaks or pessimism at market bottoms. Identify strong Support/Resistance zones – points where the price is trading with high volumes.* A climax is a market condition that is characterized by escalated trading volume and sharp price movements at the end of a bull or bear market cycle for company shares, an index or a commodity.Extreme Volume readings - Climax Volume* often highlight price reversals.Rising volume translates as growing demand among traders while falling volume is read as a decline in interest.False breaks (fake outs) are easily identified this way. Extremely useful to traders that use breakout strategies. Using volumes we can confirm the strength/weakness of an ongoing trend.5 Correlation between Volumes and Breakouts/False Breaks (Fake Outs)Īs a rule of the thumb remember that a Green bar on the indicator (default colors), means that volume is increasing, as opposed to a Red bar which would mean, the volume is decreasing.4.1 Correlation between Volumes and Reversals.1 How to Read the Volumes Indicator MT4.
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