This is how the markets have been moving for over years. Smart money always seeks to mask their trading activities, but their footprints are still visible. We can read those marks by using the proper tools.

Here is another strategy on how to apply technical analysis step by step. Make sure you follow this step-by-step guide to properly read the Forex volume. The Chaikin indicator will add additional value to your trading because you now have a window into the volume activity the same way you have when you trade stocks. Please leave a comment below if you have any questions about the volume indicator Forex! Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders!

We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.

Is there a time limit on how fast the smart money build up should be? In your example it only takes a few days. Would a run up of say weeks still be a valid signal? It's shows good , but maths is applicable market, company and is business in and exit or stay safe for future. This step-by-step guide will show you an easy way to trade with the MACD indicator. Get the free guide by entering your email now! Please log in again. The login page will open in a new tab.

After logging in you can close it and return to this page. You can take advantage of analyzing the strength of a trend based on volume activity. The Forex market, like any other market, needs volume to move from one price level to another. Table of Contents hide. The price needs to remain above the previous swing low. Wait for the candle to close before pulling the trigger. Decreased Volume before a breakout. List of Volume Indicators. Jordan says:. May 2, at am.

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Close this module. Get our FREE MACD Trend Following PDF 📕. Email Enter your email address. More from my site September Forex Trading Income August Forex Trading Income A Great Forex Trade in June — Almost 12 Candlestick Reversal Patterns May First Two Weeks Income Forex Trading April Month End Forex Trading Income.

About the Author David Summer, father of three, living in the UK. Leave a Reply Cancel reply. Recent Posts Its Not How Often You Win or How Often You Lose.. Categories All Posts Bonds Books Forex News Forex Trading Forex Trading Training Forex Volume Fotis Trading Academy FX Trading How To Start Forex Trading Metatrader 4 Mindset Monthly Income My Trades Options Reviews Technical Analysis Trades That Worked. High volume and high liquidity also create tighter spreads, which means your trades go through more effectively.

High trading volume has several benefits, but there are by-products too, deemed negative. The price changes rapidly when there are lots of buyers and sellers active in a marketplace.

There is a good way to counter volatility, called tick volume. Unlike high volume, low volume means there are fewer buyers and sellers and less liquidity. For most FX traders, low liquidity is a nightmare, as it means risking getting stuck in a position and possibly taking bigger losses than anticipated. It also means wider bid ask spreads which can add to the transaction costs. Both distribution and accumulation are easily calculable:. Compare the result over two days.

A tick, in trading markets, such as stocks, futures, or Forex, is the smallest increment by which these trading instruments can move. Another way of describing a tick is as a single change in the currency price quote in either direction.

One trade is one tick, so if you see a significant change in the tick volume in a short space of time, it means there are lots of positions being opened and closed. The math here is very straightforward, but you will require an Intraday Chart.

Choose your desired time period, such as 10 minutes, and then count the number of ticks during that time period in the Intraday chart. What is the Difference Between Tick Volume and Trading Volume? You can see that the higher the number of sales, typically the higher the volume of sales too, and whilst the data correlates, it is not exact. There are TWELVE ways to calculate volume in Forex Trading FX. This list is in no particular order, but it does raise the question…. Some say Chaikin, some say VZO, and others swear by MFI and VWAP.

You should try as many as you feel comfortable with, research strategies as you go, and find which one brings you the best results. The twelve indicators we listed offer different functions and benefits, which can be incredibly useful for your trading strategy, or utterly useless.

At least, here is what they aim to do. How is Trading Volume Visually Represented? If we remember that a tick is a single change in price from a single trade, and that volume is the amount of money that changes hands between traders in total, then we need to know how it is displayed.

In Forex trading, the trading volume is represented in green and red bar charts.

For exchange-traded assets like stocks, volume refers to the number of shares that changed hands over that period. It is usually plotted below prices, and gives a good indication of the level of participation in the market.

Volume primarily serves to validate price action. When price action is accompanied by high volume, it is more likely that the movement is a true reflection of the market sentiment, and not just a result of random noise. When prices are trending with high volume, there is likely a fundamental impetus driving the movement, which is causing a large number of participants to jump onboard. Price consolidations occurring on high volume will likely result in reversals.

A few Dojis occurred on high volume, indicating a serious struggle between the bulls and bears. Prices eventually reversed, and that price level became a key support that has yet to be broken. Volume can thus be used to improve the reliability of trading signals, much like how customer reviews improve your confidence when shopping for a product. Forex is decentralized, and there is thus no central reporting of trading volumes. But if you look at your MT4 platform, there is a volume indicator available.

What is this? This volume indicator refers to tick volume , which is the number of price changes that occurred over that period. Prominent authors such as Anna Coulling , who is a strong proponent of volume price analysis, certainly believe so. It makes good sense after all. You can expect a very strong correlation between market activity and price movement. The chart below shows the January US nonfarm payroll release. Notice the sharp increase in tick volume immediately before and after the release.

Each forex broker will report a slightly different tick volume. Nonetheless, if you use an ECN broker that subscribes directly to the interbank liquidity pool, you should get a quality feed. Not perfect, but nothing in trading ever is. Signals that occur together with high volumes tend to be more reliable. We want to take only entry signals that occur on high volume, which increases the probability that the trend will continue. There are countless financial transactions occurring around the world, with participants ranging from central banks to retail traders.

Any single bar will be contaminated with a certain degree of random noise. The volume of any period, when considered in absolute terms, has little value. Buy when price closes above the period upper Bollinger Band Sell when price closes below the period lower Bollinger Band. The chart below shows the simple strategy in action, with the trailing stop already locking in a substantial profit. The strategy is profitable in the long-term, but there are numerous deep drawdowns.

These are simple moving averages of volume, similar to those used for prices. MT4 does not contain an average volume indicator by default. The first filter will only allow entries when average volume has been rising. Note that the filter conditions will be identical for both the long and short sides, since we are looking for strong market participation in both cases. A lower band penetration occurred after a brief band squeeze, which was validated by rising volumes.

Also notice the somewhat regular pattern of rising and falling volumes. These are a result of the increased volumes during the London and New York sessions. With this filter, trades will only be taken if the period average volume exceeds the period average volume. Like the rising volume filter above, this indicates increasing participation in the market.

We can see from the data window that the average volume over 20 periods is ticks, higher than the period average of ticks. A large sample size improves the reliability of your backtest. Generating sufficient trades on the higher timeframes is usually a challenge, even when using over 17 years of historical data.

When adding filters to your strategy, you need to decide whether the performance improvement justifies the loss of trades. Now that we have eliminated most of the deep drawdowns from the original strategy, stagnation has dropped from to days. Volume filters help you focus on entry signals generated when there is strong market participation. Like prices, volume feeds are broker-dependent. A reputable ECN broker will probably be your best option. Access day FREE trial here!

Get up to USD discount! Try the FREE version here! The MACD is a simple and effective momentum indicator. The Laguerre RSI attempts to improve the responsiveness of the regular RSI, whilst keeping whipsaw trades to a minimum.

Here I explain its inner workings and show you how to build a trend following strategy around it. Have you heard of fixed ratio money management? How does it compare to the popular fixed fractional approach? The ability to efficiently trade a diversified portfolio of strategies is one of the biggest advantages of algorithmic trading. The QQE is a mysterious indicator that sometimes pops up in trading forums. Does it deserve a place alongside the more traditional momentum indicators like the RSI and CCI?

Bollinger Bands are great at detecting overbought and oversold conditions. Trailing stop losses are a popular feature in many trend following systems. Bollinger Bands, the ever-popular technical indicator among retail traders, actually contain two inbuilt trailing stops. Are these any good? Hey there, Wayne here! Trading Tact is where I share my trading methods and insights.

Get more trading ideas and strategy development tips delivered to your inbox! We keep your data private and share your data only with third parties that make this service possible.

Read our full Privacy Policy. Your email address will not be published. Submit Comment. Have you noticed that forex weekend gaps usually reverse within 3 days? Should you increase your lot sizes for higher probability trades? The Money Flow Index is sometimes called the volume-weighted RSI. Can it outperform the RSI in this trend following strategy?

Are you a victim of excessive trade slippage? Selecting a profitable entry is a critical step in strategy development. The Schaff Trend Cycle is a unique combination of the MACD and Stochastic indicators.

The Kelly criterion is a famous mathematical formula that attempts to maximize your long-term capital growth. Knowledge of intermarket correlations can improve your forex trading win rate. Here I explain three important types of correlations, and how you can use them to benefit your trading. Forex day trading seems to have a particular appeal to new traders. Here I highlight five hidden challenges of day trading, and offer some suggestions on how to overcome them.

Partial profit taking is a dilemma often faced by long-term trend followers. Could this benefit your overall strategy performance? A catastrophic stop loss is a vital risk management tool for many traders. Get trading ideas and strategy development tips delivered to your inbox!

Forex Trading With Volume — Does It Work? Mar 2, Volume is seldom discussed in forex trading. But as a stock trader would tell you, volume provides insights into the underlying market sentiment. Traders have long used volume to gain insights into the markets. Why is Volume Useful? In particular, volume can reveal whether trend continuation or reversal is likely to occur. The following table summarizes how volume validates price action: Volume can thus be used to improve the reliability of trading signals, much like how customer reviews improve your confidence when shopping for a product.

Is Volume Relevant in Forex Trading? A green bar means tick volume is rising, while a red bar means tick volume is falling. Is tick volume a good substitute for actual trading volume? When making use of volume, I have a couple of recommendations: 1. Use Average Volume Tick volume should be averaged over a certain number of bars.

Using average volume will mitigate the effects of noise and improve your signal reliability. Use Volume in a Relative Sense The volume of any period, when considered in absolute terms, has little value.

Generally, increased trading volume will lean heavily towards buy orders. Unlike high volume, low volume means there are fewer buyers and sellers and less liquidity. At the same time, a sharp rise in volume can also signal the potential end of a trend. February 12, at am. Nonetheless, if you use an ECN broker that subscribes directly to the interbank liquidity pool, you should get a quality feed. May 31, at am.

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