Forex trading volume


Almost everything is derived from price and calculated based on price, so using price action as the primary source for decisions is only logical. Using volume to define trading decisions makes sense if it is used as a confirmation. Here are its primary advantages:. Volume can confirm the trend direction as traders want to see increased volume in the direction of the trend and decreased levels of volume when the currency pair is correcting in the opposite direction of the trend.

Read here more information how to interpret divergence. During a consolidation, volume measurements typically are low. If volume picks up upon the break of that consolidation pattern wedge, triangle, flag, etc , then the volume is confirming a higher chance of a sustainable breakout. Read more on trading breakouts here.

In previous articles of mine, we have discussed how to interpret the above-mentioned elements. Please go to these links for detailed and in-depth information:.

Accumulation is a phase when buyers are controlling the market. If the volume is increased when the market is correcting in a downtrend, then this typically means that more buyers are stepping into the market and a reversal could occur. Usually, these are confirmed when:. Distribution is a phase when sellers are controlling the market. If the volume is increased when the market is correcting in an uptrend, then this typically means that more sellers are stepping into the market and a reversal could occur.

It is calculated as follows:. If the indicator is falling then it indicates distribution selling of the currency. If the indicator is rising then it indicates accumulation buying of the currency.

The most logical place to start is the volume indicator. This tool calculates the number of ticks which a currency moves up and down. It is often used in other calculations as well. For instance, the AD methodology mentioned in the paragraph above includes volume as part of its basic parameters. The tool was developed by Joe Granville and is used to detect whether the volume is bearish or bullish oriented. OBV marks the particular volume of the day as a bearish or bullish depending whether the day has been bearish and bullish.

The total then indicates the overall sentiment of the market. The money flow index shows the money flow and is calculated in a few steps. I recommend going to this link to read the steps yourself. The MFI is calculated by:. The formula is very simple, yet provides various interpretations in combination with volume.

There are 4 different combinations based on MFI and volume. The color codes have the following meaning:. Green indicates a strong trend continuation mode. Brown indicates a potential area of the trend ending.

Blue occurs in environments when a market spikes into 1 direction, often causing confusion about the trend direction. Pink indicates the beginning of a trend continuation or reversal.

It is the equivalent of focusing on the next result instead of analyzing the process. The volume measurement in the Forex market is looking at how much price moves within a certain period and it does not care how many or few buying and selling transactions are in fact needed to make that price move 1 tick. All it knows is how many ticks it moved, regardless of the fact if trades were involved or 10, Price action is always our primary focus and we should never forget that!! Write it down on a piece of paper, if need be, with a thick yellow mark: Almost everything is derived from price and calculated based on price, so using price action as the primary source for decisions is only logical.

Using volume to define trading decisions makes sense if it is used as a confirmation. Here are its primary advantages:. Volume can confirm the trend direction as traders want to see increased volume in the direction of the trend and decreased levels of volume when the currency pair is correcting in the opposite direction of the trend. Read here more information how to interpret divergence. During a consolidation, volume measurements typically are low.

If volume picks up upon the break of that consolidation pattern wedge, triangle, flag, etc , then the volume is confirming a higher chance of a sustainable breakout. Read more on trading breakouts here. In previous articles of mine, we have discussed how to interpret the above-mentioned elements.

Please go to these links for detailed and in-depth information:. Accumulation is a phase when buyers are controlling the market. If the volume is increased when the market is correcting in a downtrend, then this typically means that more buyers are stepping into the market and a reversal could occur.

Usually, these are confirmed when:. Distribution is a phase when sellers are controlling the market. If the volume is increased when the market is correcting in an uptrend, then this typically means that more sellers are stepping into the market and a reversal could occur. It is calculated as follows:. If the indicator is falling then it indicates distribution selling of the currency. If the indicator is rising then it indicates accumulation buying of the currency.

The most logical place to start is the volume indicator. This tool calculates the number of ticks which a currency moves up and down. It is often used in other calculations as well. For instance, the AD methodology mentioned in the paragraph above includes volume as part of its basic parameters. The tool was developed by Joe Granville and is used to detect whether the volume is bearish or bullish oriented.

OBV marks the particular volume of the day as a bearish or bullish depending whether the day has been bearish and bullish. The total then indicates the overall sentiment of the market.

The money flow index shows the money flow and is calculated in a few steps. I recommend going to this link to read the steps yourself.

The MFI is calculated by:. The formula is very simple, yet provides various interpretations in combination with volume. There are 4 different combinations based on MFI and volume.