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Volume-Based Indicators

The simple way of determining where to focus your attention is on the longest volume bar. Sounds like volume indicators can be a good measure of market sentiment when combined with other indicators. This indicator also measures the cumulative inflow of money into or out of a specific trading asset, although the methodology differs somewhat from that of the Money Flow Index. The price stabilized, however, and that is why indicators should generally not be used in isolation. Conversely, the A-D line moves lower when the number of declining issues is greater than the number of advancing issues. Conversely, if the volume is low, there are only few people willing to execute their trades at the current prices, which means that they either believe that the current pricing of the contract is inadequate or that the trend is going to reverse soon. Jan 15, , 5:

Indicators are not required, but they can aid in the trading decision process. There are many volume indicators, and the following provides a sampling of how several of them can be used. On-Balance Volume (OBV): OBV is a simple but effective indicator.


This is usually done for a number of consecutive periods to calculate an index. A positive figure indicates that a bullish trend will continue, while a negative money flow indicates that a bear trend could be on the horizon. This indicator also measures the cumulative inflow of money into or out of a specific trading asset, although the methodology differs somewhat from that of the Money Flow Index.

The next step is to calculate the Money Flow Volume, which is equal to the Money Flow Multiplier calculated above x the trading volume for the period being studied. Of the 3 volume indicators discussed in this article, the On Balance Volume is the simplest to calculate. If prices go up, On Balance Volume should therefore also go up and when they are going down, On Balance Volume should follow suit. Marcus Holland - Marcus Holland has been trading the financial markets since with a particular focus on soft commodities.

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Wed, Oct 31st, I always try to use one confirming volume based indicator when I make a trade, with varying degrees of success. In my opinion the one that still gives me the best results is OBV, despite this being such a crude indicator it still seems to work best for me. They always say "Keep it Simple" I would be interested to hear other views on volume based indicators. Jan 15, , 5: Jan 23, , 1: My personal philosophy on volume is that I want to see significant activity.

That means a change from the recent pattern. For example, if I'm buying, I like to see volume increase substantially over that of the recent sessions as the market rises. This isn't an indicator, per se, but definitely falls in to the "keep it simple" category. Jan 25, , 6: Volume based technical indicators Jan 26, , OBV is good but personally I like volume action because you can vary the lookback period. Its an Indexia indicator. TRIN is a market indicator and can't be used on individual stocks.

Its uses the number of advancing and declining issues in a index and takes the volume of these. Jan 27, , Jan 27, , 9: That would be the exactly the same as using OBV then. Adv or dec and the volume. Jan 28, , Jan 28, , 9: Mar 13, , 4: Am I looking for something that's not there? The more stock that is available via the float, the less locked stock that is unlikely but not impossible to be traded.

A good example is Wal-Mart. Because of the way in which this indicator is derived it can change direction very quickly, making the longer term analysis ie peaks and troughs, more valid.

The Force Index is a tool derived by Dr. This is a great book and a recommended read but that is another story. Elder believes that three things account for market movement; direction, extent and volume and this indicator takes all three into account.

The formulation is very simple. The bigger the move and the bigger the volume the more force behind the move. The major differences are in how the data is derived and then how it is displayed.

Unlike OBV which compares two closing prices and then simply adds or subtract volume the VFI uses a more complex calculation. This is then applied to volume to produce a positive or negative reading with certain cut off limits that are intended to smooth out wild swings in volume. This is then smoothed again using a moving average, usually 50 bar, to produce a super smooth oscillator that travels above and below a central zero signal line.

Volume and Market Interest

Three Volume-Based Technical Indicators to use with CFD trading While most technical indicators study changes in price behaviour in an attempt to predict future price movements of CFDs, there is another subset of indicators that study changes in the trading volumes that are believed to precede a reversal in the current trend. Almost all other indicators take into account only the price. Hence, in theory, volume-based indicators should provide us with better and more precise trading signals. On the other hand, volume can also distort generated signals, which happens mainly when the . Volume is one of the oldest day trading indicators in the market. I would dare to say the volume indicator is the most popular indicator used by market technicians as well. I would dare to say the volume indicator is the most popular indicator used by market technicians as well.