Forex Volume Indicators

Forex trading using the forex volume indicators

Forex Volume IndicatorsThe forex trading market is analyzed either with the help of the fundamental analysis or by the technical analysis. The economical news of the market all over the world is the basis for the fundamental analysis. However the technical analysis is based on the usage of some tools & softwares popularly known as the indicators. The technical indicators predicts the price moment on the basis of the past price movements. Many technical indicators are available today in the market. The forex volume indicators are very helpful to the traders as they predict the investor’s interest in the market.

The forex volume indicators calculate the amount of trade going on in the market during a certain period of time. The high volume of these indicators shows that there large number of traders in the market thus resulting in the more liquidity and less volatility in the market. When the volume slowly increases in the direction of the market trend the traders enter the market. The decrease in the volume means that the trend is soon going to end. The key principle to understand the forex volume indicators is when to act on what the current data is telling you.

While trading in the forex following features are offered by the forex volume indicators:

  • The strength and the weakness of the market trend are analyzed by the volume indicators.
  • The rise in the indicator’s volume means that the interest among the traders is also rising while falling of volume indicates the declining interest of the traders.
  • Usually the extreme volume readings result in the price reversals of the market.
  • The high volume points of the market indicate the points of support and resistance.
  • The forex volume indicators validate and void the all kinds of the breakouts and market spikes.

What is the methodology of using the forex volume indicators?

  • The volume indicator strengthens the main trend or begins the new trend as the growing interest in the market is indicated by the increase in the volume.
  • Trend reversal or temporary market fusion occurs when volume decreases because at that moment the interest in the market also decreases.
  • Upcoming reversals are signaled by the rapid & vigorous increase in the volume, while during the creeping decrease in volume may result in the fast price moves.

Why to use the forex volume indicators?

  1. After the price the volume is the next most valuable data used for determining the current state of the market. More the volume more is the number of market participants. If the financial institutions are also involved this means that there would be the highest turnover to the market. When they are trading then it shows that the interest to the price and to the trend is overall high.
  2. The case is completely different for the small volume. Small volume indicated by the forex volume indicators mean that there is less number of participants in the market and no one is interested in the price. As the market will be run by the individual traders thus the change will be weak.

The forex volume indicators easily evaluate the power of the up or down trends of the forex market. Both up & down trends are equally important only if the increase in volume occurs when price moves along the trend while it decreases when price goes against the trend. The price level at which the volume increases vigorously shows that the traders are very interested in the current market state. The moment when there is an uptrend in the price but decrease in volume means that price will start to fall. But when there is a price downtrend with no increase in the volume, the price will shoot up.

Now here are some of famous and renowned forex volume indicators.

  • Acceleration bands- this type of the forex volume indicators suggest that the beginning of the strong sell-off when there is a breakout outside the acceleration bands. Its main use is to find the acceleration in the currency pair price & the benefit until the acceleration exists.
  • Market facilitation index- it measures the willingness to move the price. All time frames can use these forex volume indicators from 5v minutes up to the daily & weekly frames.
  • Chaikin money flow- this indicator views the flow of money combining the price and the volume during a certain period of time.

Although the forex volume indicators indicates the power of the up or down trends, but this indicator should be used as a precise evidence of the market along with the other indicators.

Next Indicators Guide: Cycle Indicator