Calculating the volume for traders and investors is very essential for two particular reasons. The first reason is that it shows the psychological level of traders.

Here is one example of it: when the price of an asset moves up with a significantly higher volume, it implies that the trend is more substantial. Therefore, it is creating a bullish signal. Contrarily, if the volume of one particular asset is moving down with a high volume, it expresses a sell-off. Once an increase in volume in an upward trend leads to a reduction in the asset price, a divergence is very evident. A price drop on a large volume is showing something caused the move.

The event that triggered the move could be news or economic releases, such as an interest rate decision and non-farm payrolls. Some of these patterns refer to flags, shoulders, and triangles. Successful and experienced Forex traders are constantly referring to the volumes when confirming these charts.

In order to really get the Forex volume indicator explained successfully, we need to give you a brief step-by-step guide on how to use volumes for technical analysis.

Here is what you need to do:. Good luck! Stocks markets consolidate, But who are the winners? Oil leaks as a result of Hurricane Ida. The Dollar Has Weakened. The U. dollar fell on Tuesday. What about Euro and Yen? EURUSD and GBPUSD: the pressure is moved to the dollar. What Is a Basing Candlestick and How Traders Use Them? Save my name, email, and website in this browser for the next time I comment. Home Advanced Forex Volume Indicator Explained — What is the Indicator? By Alexander Zane On Sep 7, Forex Volume Indicator Explained — What is the Volume Indicator Are you interested in becoming a successful and wealthy Forex trader in the future?

What does the volume indicator refer to strictly? Higher volume explained When the volume is intensely high, it means that the trend is coming to an end. Why is the volume significant to investors and traders? What is the fundamental principle of volume price analysis? What else do traders use volume for? How can you use volumes for technical analysis? Altcoins Commodity Prices FARM Forex Explained Forex trading Forex trading tips Trading Tips. Share Facebook Twitter ReddIt Pinterest Email.

Prev Post Stocks markets consolidate, But who are the winners? Some pull the trigger immediately, while others wait for the confirmation to appear. If we see price approaching a key decision point on lower or decreasing tick volume, we are likely to find ourselves in a situation where that level will be rejected. This type of price acceleration without accompanying volume tends to paint a deceptive picture of market intentions, and it is certainly not one that piques the curiosity of smart money.

Smart money refers to trade from big players like financial institutions and banks. The lack of this volume riding the move leads to thinner market liquidity, which allows for more price extension even on modest volumes. On the other hand, if the price swings towards a decision point or a level is broken amid larger or increasing tick volume, it usually indicates that the bias has the backing of institutional money. When this occurs, the growing tendency will likely continue.

If we see a volume that stands out above the rest at a critical decision moment, with a sizeable tail of at least 12 the size of the candle, we get what is known as an absorption candle. The below chart illustrates how a tremendous amount of selling pressure was applied, but buy orders ended up overwhelming buyers.

A stopping volume candle is another candle structure that delivers a message similar to the absorption candle. This is a high-volume move, but the candle size is significantly smaller this time. The real-money candle is another type of price formation that will be shouting at you. Its distinguishing feature is the large candle, which is accompanied by ballooning volume.

When these candles appear, one can anticipate a limited continuance of the trend. They can only be built with the help of the smart money community. As momentum traders jump on the bandwagon, this candle formation tends to continue longer with little pullback if there is adequate space till the next target area.

However, unless you are a short-term momentum trader, it normally retraces due to over-extended conditions, and that is where swing traders and the smart money will try to re-engage. The exhaustion candle is the next price structure on the list. If the price reaches a decision point in the midst of low volume action, the prospects of the area being violated are quite limited.

Sellers simply exhaust themselves, as the word implies. As a result, the price discovery dynamics will cause the price to retreat, hunting for fills at the next optimal places of stability. What timeframe will you use? Are you a scalper, day-trader or position trader? Heinrich is a forex and CFD enthusiast with a passion for writing good informative quality content.

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Are you interested in becoming a successful and wealthy Forex trader in the future? Would you like to earn huge profits doing foreign exchange on a daily basis? If so, you must be aware of the volume indicator. Volume indicators are those that strictly account for the volume. Most often, it happens during the course of the day.

So, to be precise, the volume indicator is a kind of a mathematical formula that is visually represented most often in using charting platforms.

The reason for that is because traders are very indecisive about market direction. The eventual breakout from the trading range happens alongside a massive increase in volume since losing traders are in a hurry to exit. In case a breakout occurs in the lower volume, it means that there is no emotional commitment to the new trend while the market is very likely to return to its range. So, when the volume is decreasing during a market rally, it means that an increasing number of buyers and sellers are being drawn into the market.

When the volume is intensely high, it means that the trend is coming to an end. What does it mean exactly? Well, it indicates that a massive number of traders losing positions are building out. The most common situation regarding a trader who is holding a losing position for a long time is when the loss gets intolerable, and he decides to exit the market.

Once it happens, the trend reverses, and the prices are going in the expected direction. On the other hand, professional and experienced traders exit losing positions quickly or wait for a convenient opportunity to re-enter the market. Price movements happen because of supply and demand in traditional markets worldwide. It means that when the demand for a product exceeds the supply, thus resulting in a higher price. In opposition to that, when the supply exceeds the demand, the commodity price comes down.

Imagine having a huge demand for dollars. In that case, the price against the purchasing currency will go higher. Traders who are primarily focusing on the volume achieve more than their counterparts who are ignoring it. This is because the volume represents the total value and number of transactions during a specific period. Calculating the volume for traders and investors is very essential for two particular reasons. The first reason is that it shows the psychological level of traders.

Here is one example of it: when the price of an asset moves up with a significantly higher volume, it implies that the trend is more substantial. Therefore, it is creating a bullish signal. Contrarily, if the volume of one particular asset is moving down with a high volume, it expresses a sell-off.

Once an increase in volume in an upward trend leads to a reduction in the asset price, a divergence is very evident. A price drop on a large volume is showing something caused the move. The event that triggered the move could be news or economic releases, such as an interest rate decision and non-farm payrolls.

Some of these patterns refer to flags, shoulders, and triangles. Successful and experienced Forex traders are constantly referring to the volumes when confirming these charts. In order to really get the Forex volume indicator explained successfully, we need to give you a brief step-by-step guide on how to use volumes for technical analysis. Here is what you need to do:. Good luck! Stocks markets consolidate, But who are the winners? Oil leaks as a result of Hurricane Ida.

The Dollar Has Weakened. The U. dollar fell on Tuesday. What about Euro and Yen? EURUSD and GBPUSD: the pressure is moved to the dollar. What Is a Basing Candlestick and How Traders Use Them? Save my name, email, and website in this browser for the next time I comment. Home Advanced Forex Volume Indicator Explained — What is the Indicator?

By Alexander Zane On Sep 7, Forex Volume Indicator Explained — What is the Volume Indicator Are you interested in becoming a successful and wealthy Forex trader in the future? What does the volume indicator refer to strictly? Higher volume explained When the volume is intensely high, it means that the trend is coming to an end. Why is the volume significant to investors and traders? What is the fundamental principle of volume price analysis? What else do traders use volume for?

How can you use volumes for technical analysis? Altcoins Commodity Prices FARM Forex Explained Forex trading Forex trading tips Trading Tips. Share Facebook Twitter ReddIt Pinterest Email. Prev Post Stocks markets consolidate, But who are the winners? Next Post Oil leaks as a result of Hurricane Ida. You might also like. Prev Next. Leave A Reply. Add FinanceBrokerage to your Homescreen!

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When marketplaces overlap, such as the London-New York overlap or the Tokyo-London overlap, there is a lot of volume. The most common situation regarding a trader who is holding a losing position for a long time is when the loss gets intolerable, and he decides to exit the market. You might also like. Each letter stands for every new minutes period in this profile. Before reading the article and writing your questions in the comments section, I recommend to watch this video. However, unless you are a short-term momentum trader, it normally retraces due to over-extended conditions, and that is where swing traders and the smart money will try to re-engage. He strives to showcase the best forex brokers in Africa.

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