Forex currency trading volume indicator

Most look specifically at buying vs. Others attempt to identify emotions that are moving the security at a particular time. For example, exceptionally high volume compared to a moving average of volume can reveal euphoria or fear while much lower than average volume can reflect apathy or disinterest. These indicators measure shares in the equity markets, contracts in the futures markets, and tick movements in the forex markets.

All versions attempt to accomplish the same types of technical analysis. When a market rises on increased volume, it is considered to be under accumulation. Conversely, when a market falls on increased volume, it is considered to be under distribution. In addition, a market rising on decreased volume generates a bearish divergence while a market falling on decreased volume generates a bullish divergence.

Forex market volume evaluates the degree of price movement within a certain period, rather than looking at individual buy and sell transactions. Forex traders often supplement their accumulation-distribution analysis by looking at open interest in the currency futures markets.

Whether equity, contract, or pair, volume is used in conjunction with price action to confirm trend strength, reveal trend weakness, and confirm breakouts and breakdowns. As the name states, the indicator attempts to determine if a security is being accumulated bought over time or distributed sold over time. The indicator also carves orderly patterns over time that look similar to price action, with channels, trendlines, and triangles assisting prediction. The calculation has three primary components.

The indicator measures accumulation and distribution of a security over time. As with other oscillators, CMF generates buy, sell, and confirmation signals through bullish and bearish convergences and divergences as well as crossovers through the zero line. Chaikin applied a period one month setting to the indicator but that element is now customizable in charting programs and has different implications, depending on the chosen period.

According to the creator, money flow persistence over 6 to 9 months evaluates accumulation or distribution by major funds and institutions. Volume Oscillator VO Volume Oscillator VO identifies accumulation and distribution by examining the relationship between two volume moving averages. A fast cycle moving average of 14 days or weeks is often used in conjunction with a slow cycle moving average of 28 days or weeks but settings are customizable. The calculation simply subtracts the slow MA from the fast MA and plots the result as a line or histogram.

As with other oscillators, VO fluctuates across a zero line but has no fixed upper or lower values. VO is non-directional and expected to turn higher in both uptrends and downtrends. It generates a bearish divergence when price is rising and VO is falling and a bullish divergence when price is falling and VO is falling.

Each market or exchange will track its own volume and distribute the data to traders. These volume reports usually come out in real-time, but they are only estimates. For accurate volume figures, traders usually have to wait until the end of the day. However, there are other ways that traders can determine market volume, such as the tick volume or number of price changes. If the market price is changing rapidly, it can be an indicator of high trading volume.

The Importance of Volume in Technical Analysis Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Whenever the price of an asset increases or decreases with relatively high volume, it is viewed as a stronger, more significant move. If the price fluctuates in a similar manner but the volume is relatively low, then the move is viewed as weak.

If the volume is high during the day relative to the average daily volume, it is a sign that it is reversing its trend. On the other hand, if the volume is below average, there may not be enough indication to support a true trend reversal. Volume precedes price. Volume is closely monitored by traders to form predictions of upcoming trend reversals. An example of this belief is when volume is starting to decrease in an uptrend, it is usually recognized as a sign that the upward price movement is about to end.

Volume should confirm the trend. If the price is moving in an upward trend, volume should increase. If the price is moving in a downward trend, the volume should also increase If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. For example, if the price is in an uptrend but the up trading days are marked with lower volume, it is a sign that the trend is starting to lose its legs and may soon end.

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