The volume indicators are similar to the oscillators, because they both indicate whether there is some movement in the market or not. However, the volume indicators illustrate the investors’ interest in the market – high volume means high interest and a possible strong trend or reversal, while low volume indicates insufficient interest in the market.
To be a little bit more specific, if you observe high volumes in a given market, then either a strong trend or a rapid reversal is coming. If you notice low volume, then the market is either preparing for consolidation (sleep mode), or a possible reversal is on the way. The traders are hunters, they look for prey and blood – profitable trades, that is why you have to keep an eye on the traders and adjust your strategies properly.
Many traders believe that the Volume indicator in Forex is as important as the price itself. All we are going to say is that this indicator is definitely a valuable member of our trading strategy.
The On Balance Volume in Forex illustrates the trend’s direction and strength. The OBV’s most important characteristic is that its algorithm is based on the previous volume values.
The Money Flow Index is a valuable asset for many experienced traders in Forex, because the MFI illustrates the buying and selling pressure in the market.
The ADL or Accumulation Distribution Line is another great volume indicator in Forex that illustrates the price’s trend and strength; you can also make use of the possible divergences.
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