Trading volumes in trading
Trading volumes in trading
The method of trading by market volumes is considered to be young relative to most technical analysis strategies. Despite this, this tactic attracts the interest of many speculative traders, because it allows predicting price movements with high accuracy. With the development of high technology, an average trader has access to information that has long been classified. Now he can make correct predictions not only on price movements, but also on other market data. Today we will tell you how to use trading volumes for accurate order placing. Trading volumes.
Volumes on financial market
Volume of trade (VSA) refers to the number of transactions for a specific time period. Analysis of this indicator plays a huge role in forecasting quotes, as it allows to indicate the level of demand for a certain asset. The research should concern not only the number of transactions, but also the format of candlesticks, the moment of opening and closing elements. Market analysts regularly monitor this information and create correct forecasts.
Using the VSA, a specialist can determine:
Favorable and unfavorable moments for making a trade deal.
Periods when price movement is best predicted.
The direction of the current trend is defined as a movement to the side where the largest volumes are concentrated.
It is also worth considering that it is practically unrealistic to get 100% data about trading volumes. The financial market does not have a certain center, so there is no single information base. Intermediaries can only analyze their clients, and therefore their information is incomplete. At the same time, fairly accurate indicators are created on the basis of VSA for forecasting market trends. By using these software developments, the investor will significantly increase his chances of earning. Trading volumes in trading.
How to use trading volumes in practice?
Indicator programs with tick volumes are often used in the Forex market. The simplest of them is considered to be Volumes, developed for Metatrader 4. The system does not show volumes or trend direction, but rather clearly shows the number of performed operations. Focusing on this information, you can make your own forecast for the selected investment asset.
In the computer program, one tick defines one transaction regardless of its trading volume. In the graphical visualization it is displayed in the form of a vertical line, the color and height of which signalize the performed operations.
In order to identify the signals, one should monitor the price movement and at the same time monitor the number of deals. If a quote shows upward movement when volume decreases, the price reversal should be assumed. Decrease in buyers' interest indicates the optimal moment for opening a sell deal. The situation on descending trends should be interpreted in the same way. Having in mind the interest of buyers and sellers, the investor will quickly understand in which direction the quote will be directed.
When working with trading volumes, the expert should pay attention to the following facts:
The formation of a strong trend will be accompanied by a steady increase in volume.
If a bullish trend shows a decrease in buyer activity, there is a high probability of a corrective movement.
The local price peaks correspond to the maximum volume value.
If there is an upward price movement in the market, which is accompanied by an increase in buying activity, then the trend can be considered stable.
The Volumes' indicator can be used as a self-sufficient program or as part of more complex strategies.
Johannes Röll
Johannes Röll was born 1978 in Brilon,Germany. Graduated RWTH Aachen University. Over the past ten years he worked as Head of the plastic card team, where he was mainly responsible for the development of the distribution, Head of sales Department and Financial Analyst,where he got experience in planning and support sales figures for branches. For the present he works as freelancer
