How to read volume indicators and why are they so important for traders?
By The Forex Review - 23 / May / 22 563
Dominick Bell
An uptrend means high investor interest in this market, while a downtrend can mean the opposite.
Main Forex volume indicators
Volume indicators refer to sources of information that traders use to identify markets of interest to investors. Once this interest is identified, traders follow it to keep abreast of important market movements.
OBV, the oldest volume indicator
"Balance Volume" or OBV is a volume indicator that uses a curve to represent the sum of transactions made during the day. With this indicator, we are talking about "volume on the rise" on days when the volume of transactions in the market is increasing, and volume on the decline on days when the volume of transactions is decreasing.
In the first case (advance volumes), OBV is used to confirm the transaction trend. To do this, this trend must go in the same direction as prices. For Joseph Granville, the developer of this indicator, this is accumulation.
In the second case (volumes are decreasing), OBV readings depend on the nature of prices. There will be days when we will talk about accumulation and days when we will talk about distribution. Note that the OBV is difficult to read during the overload phase.
Williams accumulation-distribution indicator
Larry Williams took into account the difficulties of analyzing the OBV volume indicator. By adding a cumulative curve to the indicator curve developed by Joseph Granville, he improved the accumulation-distribution line to better detect deviations between volumes traded during the day and prices, which led to the design of the Williams accumulation-distribution indicator.
This forecasting tool represents the fraction of volume in positive (+) or negative (-) terms, given the closing price and the average price of the day. Thus, the percentage of daily volume is assigned a positive value if the closing price is higher than the average price, and vice versa.
Negative volume index or NVI
The Negative Volume Index (NVI) allows for the principle that on days when trading volume is up, all traders enter the market, and on days when trading volume is down, only so-called sophisticated investors (smart money) are in the market.
Based on this principle, INN is interested in sophisticated investors and considers them specialists, unlike other investors (odd lotteries) who would be ill-informed and would buy securities at retail.
So the goal is to follow the smart money, not the random lottery. From this analysis, it follows that you should buy a call option when IVN is rising, that is, on days when trading volume is falling.
Positive volume index or PVI
A positive volume index (PVI) is not the opposite of IVN, but rather complements it. In fact, a positive volume index takes into account the behavior of uninformed investors and associates it with growing volumes.
This allows you to define an analysis tool that uses current trends to make transactions.
The Importance of Forex Trading Volume
The volume in the stock market is only the volume of the stock at the time of the trade. On the other hand, Forex volume is the total value of market movements or even all sales and purchases made during a session.
On the other hand, a high trading volume on Forex means that an agreement has been reached between sellers and buyers on a price.
This material was wrote by support of the site forexsniper.info
For your safety, we have compiled a blacklist of brokers.
The spreads are low here, so I immediately decided to invest a sufficient amount. I want to get the maximum profit. I plan to cooperate with this broker at least for a few months, maybe longer! Our cooperation has existed since May. So far, only good impressions. The service is excellent.
Derrick 16.04.2021I am calm about my assets. I am sure that with this broker you can safely invest, participate in trading and get your profit. With such a competent approach, one can hope for maximum efficiency. Your skills are also absolutely important. It's just nice to have such a partner.
O’Brien 18.04.2021No complaints. Mistakes here are common for this market segment. Somewhere you lose a little, but there is always an opportunity to return. This broker works well, knows the market . I always rely primarily on my skills and experience. And flair. I need a broker to be more confident. Not all market trends can be seen, especially now. Due to the situation with the pandemic, the financial market is volatile. So I feel more confident with a broker.
Allen 21.04.2021