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Volume is simply the number of shares (or contracts) traded during a specified time frame (e.g., hour, day, week, month, etc). The analysis of volume is a basic yet very important element of technical analysis. Volume provides clues as to the intensity of a given price move.
Interpretation
Low volume levels are characteristic of the indecisive expectations that typically occur during consolidation periods (i.e., periods where prices move sideways in a trading range). Low volume also often occurs during the indecisive period during market bottoms.
High volume levels are characteristic of market tops when there is a strong consensus that prices will move higher. High volume levels are also very common at the beginning of new trends (i.e., when prices break out of a trading range). Just before market bottoms, volume will often increase due to panic-driven selling.
Volume can help determine the health of an existing trend. A healthy up-trend should have higher volume on the upward legs of the trend, and lower volume on the downward (corrective) legs. A healthy downtrend usually has higher volume on the downward legs of the trend and lower volume on the upward (corrective) legs.
Example
The following chart shows Merck and its volume.(check the chart)
Prices peaked at the end 1991 following a long rally. This was followed by a price decline (trendline "A1"). Notice how volume was relatively high during this price decline (trendline "A2"). The increase in volume during the price decline showed that many investors would sell when prices declined. This was bearish.
Prices then tried to rally (trendline "B1"). However, volume decreased dramatically (trendline "B2") during this rally. This showed that investors were not willing to buy, even when prices were rising. This too, was bearish.
This pattern continued throughout the decline in 1992 and 1993. When prices rallied, they did so on decreased volume. When prices declined, they did so on increased volume. This showed, again and again, that the bears were in control and that prices would continue to fall.
A question, if I may - does anyone know exactly what volume is measured, and where? Since forex is decentralized, wondering how accurate a gauge it might be.
Curious,
Jeff
volume as displayed by mt3.xx or mt4 is tick volume, which does not accurately indicate transaction size or number of transactions...just the number of ticks for any given bar.
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Is there a way or indicator which actually shows the volume of pairs. I dont even know how they calculate the volume when they say that the volume is high or low..please help
unfortunatly no there really isn't any true way of showing the actual volume of each pair in retail forex. Only true way is through futures volume on the CME.
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Is there a way or indicator which actually shows the volume of pairs. I dont even know how they calculate the volume when they say that the volume is high or low..please help
Thanks
Babar
Hi
Unfortunately it is imposible to know the volume in FOREX market because this is not a centralized market located in one single place (like a stock exchange). The volume in MT4 is simulated based on the number of ticks (changes in price) in a bar period.
A true "VOLUME" Indicator
Linear Mode
