Volume is a calculation of how much of a particular financial asset has been sold over a given time span. It is very powerful, but it is often ignored because it is an indicator that is so basic. Volume information can be found almost anywhere but few traders or investors know how to use it to raise their profits and reduce risk. There is one seller for each buyer and each transaction adds to the overall volume count. This is when buyers and sellers decide at a certain price to make a deal.
Volume is an important factor in technical analysis as it is used to calculate the relative value of a change in the forex market. If the FX markets make a big price change then that movement’s intensity depends on the volume for that time. The higher volume during price change, bring greater changes. Technical analysts are mainly finding price points for entry and exit, and volume rates offer hints as to where the best entry and exit points are located.
Volume is a central component of technical analysis and of trading approaches focused on momentum. Heavy volume typically contributes to persistent market increases and an intraday momentum of higher quality. And having a sense of volume or level of market activity can be very helpful for a forex trader in any instrument so you can better gauge your expectations and allow yourself to change the risk or keep winners longer.
When you watch the markets when important news is published, you might have noticed that the news on the candlestick appears to be very high volume. News events are not only some of the most difficult things to forecast on the market, but also some of the most unpredictable, and if you’ve ever watched the market when major news stories are published you’ll see that the price tends to jump a lot because everyone is trying to find out what the news release means for market direction.
After all, the volume is the fuel that drives the economy, both greater and lower. If there is no demand then it is doubtful that the market will go very far. It takes energy for a market to shift either higher or lower, and if there is little initiative or volume then the market can push into lateral contraction and only break out until the volume dramatically increases. Even if you look at the amount that you can see after the huge spike on the huge bearish candle it continues to decrease gradually, all this amount comes from the reactive traders and to some degree the trend traders who are selling only because they see the price dropping.
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