Traders have to take multiple factors into account during trading sessions. They have to observe price action, indicators if they are using such, chart patterns etc. And there is also an element called volume. How to use volume indicators in your trading? Today we will look into it.
Trade volume is simply the number of contracts or securities traded over a certain period of time. It shows whether traders are enthusiastic to buy or sell rather. Knowing the volume can help you make trading decisions. When the price and volume are not coherent, you may expect a change in the market direction is coming.
There exist indicators that measure trade volume and thus, they save you the time you would spend to do it by yourself. On the IQ Option platform, you will find, among others, the Volume Oscillator and the Net Volume.
The Volume Oscillator
This oscillator is based on the moving averages. There are two of them taken into calculations. One has typically a period of 14 days or weeks and the second one of 28. The Volume Oscillator subtracts the slow volume (Long Cycle) moving average (MA28) from the fast volume (Short Cycle) moving average (MA14). The results are presented in a form of a line.
A line moves around the 0 line. It gives positive readings above the middle line and negative below it. Positive readings are being seen as an indication of a strong movement.
High volume together with the price increase or decrease is always bearish. When the volume drops it can suggest the upcoming change.
The Net Volume
This indicator measures the volume and indicates whether the market sentiment is rather bullish or bearish. Basically, it is downtick volume minus uptick volume over a single period of time. It is shown beneath the price chart.
Positive readings give information about the bullish upswing and negative readings about the bearish downswing.
The Net Volume can be used together with some other indicators, support and resistance levels or with chart patterns.
Volume indicators reveal market interest in certain security. It can be helpful in your trading to know it as you can try to assess the future behaviour of the price.
Use some additional tools to discover the best points to enter transactions. It is always good to get confirmation before you open a position.
Trading is related to risks and that is why I suggest you use the IQ Option demo account often. You can test new indicators and strategies there. And there is always a possibility to recharge it with more virtual money when you experience too many losses. This way you may learn what brings you profits and what does not.
Wish you good luck!
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