The MFI is calculated by:. The formula is very simple, yet provides various interpretations in combination with volume. There are 4 different combinations based on MFI and volume. Green indicates a strong trend continuation mode. Brown indicates a potential area of the trend ending. Blue occurs in environments when a market spikes into 1 direction, often causing confusion about the trend direction. Pink indicates the beginning of a trend continuation or reversal. These are the volume tools you can use in the Forex market.
Remember, the volume is important for the analysis of stocks and futures. Volume, open interest, and price action are the key components in trading decisions. The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world. The reason the Chaikin Money Flow is the best volume and classical volume indicator is that it measures institutional accumulation-distribution.
Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line. The difference between the Chaikin Money Flow and the standard volume is the math underlying each indicator.
Secondly, the trading volume analysis is quite different as well as how the trading signals are interpreted. On the one hand, volume simply measures how much a given currency pair has traded over any given period of time. Volume is used to measure the strength and weakness of a trend.
As a general rule, a strong trend should be accompanied by rising volume. At the same time, a sharp rise in volume can also signal the potential end of a trend. While you can tweak the indicator settings and you can try different configurations, you need to keep in mind 3 things:. The main advantage of the Chaikin Money Flow indicator is that the indicator can assess the buying pressure vs the selling pressure of your favorite currency pair stock, ETF, cryptocurrency, futures market, etc.
With the CMF volume indicator, we can measure the amount of money coming into the market and its impact on the actual price. The CMF volume indicator can be used to confirm the strength of the trend, the accuracy of a breakout, trend reversals, false breakouts and so much more.
Gaining an understanding of the different applications of the volume indicator in trading can help you improve your results. The Chaikin Money Flow indicator can also be used to confirm the strength of a breakout. If the CMF volume reading is above zero when we break a resistance that is viewed as buying pressure. In this case, the breakout has higher chances of success. Conversely, if the CMF volume reading is below zero when we break a support level that is viewed as selling pressure.
We can also use the CMF volume readings to spot false breakout signals. If we break above resistance but we have negative readings on the CMF indicator that is a potential false breakout. Conversely, if we break below a support level but we have positive readings on the CMF indicator that is a potential false signal. Usually, in both rising and falling markets during the last stage of the trend, we can see spikes in volume and volatility.
These are trade secrets that you wish you had been taught. The Chaikin indicator will dramatically improve your timing and teach you how to trade defensively. Before we go any further, we always recommend taking a piece of paper and a pen and take notes of the rules of this entry method. You can also read a million USD forex strategy. Volume trading requires you to pay careful attention to the forces of supply in demand.
Volume traders will look for instances of increased buying or selling orders. They also pay attention to current price trends and potential price movements. Generally, increased trading volume will lean heavily towards buy orders. These positive volume trends will prompt traders to open a new position. You also need to pay attention to the relative volume —regardless of the raw number of transactions occurring in a trading period.
Ask yourself how is the prospective asset performing relative to what was expected? When the Volume goes from negative to positive in a strong fashion way it has the potential to signal strong institutional buying power. When the volume indicator Forex goes straight from below zero to above the zero line and beyond, it shows accumulation by smart money. Chances are that institutions have more money and more resources at their disposal.
Odds can be stacked against you, so if you want to change that, just follow the smart money. Once we spot the elephant in the room, aka the institutional players, we start to look for the first sign of market weakness. Here is how to identify the right swing to boost your profit. Second, as the volume decreases and drops below the zero level, we want to make sure the price remains above the previous swing low.
This will confirm the smart money accumulation. The Volume strategy satisfies all the required trading conditions , which means that we can move forward and outline what is the trigger condition for our entry strategy. Now that we have observed real institutional money coming into the market, we wait for them to step back in and drive the market back up.
When the Chaikin indicator breaks back above zero, it signals an imminent rally as the smart money is trying to markup the price again. We would need to wait for the candle close to confirm the Chaikin break above the zero line.
Here is an example of a master candle setup. This brings us to the next important step. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss. Never underestimate the power of placing a stop loss as it can be lifesaving. Never use a mental stop loss, and always commit an SL right the moment you open your trades.
Trading with a tight stop loss can give you the opportunity to not just have a better risk to reward ratio, but also to trade a bigger lot size. Last but not least, we also need to learn how to maximize the profits with the Chaikin trading strategy.
Once the Chaikin volume drops back below Use the same rules for a SELL trade — but in reverse. In the figure below, you can see an actual SELL trade example. Any market moves from an accumulation distribution or base to a breakout and so forth. This is how the markets have been moving for over years. Smart money always seeks to mask their trading activities, but their footprints are still visible. We can read those marks by using the proper tools.
Here is another strategy on how to apply technical analysis step by step. Make sure you follow this step-by-step guide to properly read the Forex volume. The Chaikin indicator will add additional value to your trading because you now have a window into the volume activity the same way you have when you trade stocks.
Please leave a comment below if you have any questions about the volume indicator Forex! Please Share this Trading Strategy Below and keep it for your own personal use! Thanks Traders! We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.
Is there a time limit on how fast the smart money build up should be? In your example it only takes a few days. Would a run up of say weeks still be a valid signal? It's shows good , but maths is applicable market, company and is business in and exit or stay safe for future. Do you want consistent cashflow right now? Our trading coach just doubled an account with this crashing market strategy!
Please log in again. The login page will open in a new tab. After logging in you can close it and return to this page. You can take advantage of analyzing the strength of a trend based on volume activity. The Forex market, like any other market, needs volume to move from one price level to another.
Table of Contents hide. The price needs to remain above the previous swing low. Wait for the candle to close before pulling the trigger. Decreased Volume before a breakout. List of Volume Indicators. Author at Trading Strategy Guides Website.
Jordan says:. May 2, at am. For example, during an upside breakout in an Ascending Triangle , it should be confirmed with an increased amount of volume. If the volume is not there to confirm the breakout move, the quality of the signal formed by the chart pattern is weakened. A chart pattern is a graphical presentation of price movement by using a series of trend lines or Technical analysis is the study of historical price action in order to identify patterns and determine A technical indicator is a mathematical calculation that can be applied to price and volume data.
It can be A binary option is a type of options contract in which the payout will depend entirely on the outcome of a My life has been filled with terrible misfortune; most of which never happened. Volume is a measure of quantity. In trading, the volume is the amount of a particular asset traded over a period of time. It is the number of units, shares, or contracts that change hands between a buyer and a seller. The more actively traded an asset is, the higher the volume will be and vice versa.
Each transaction is a single exchange and will contribute to the trading volume. It helps determine the strength of price movements. If the market price is changing rapidly, it can be an indicator of high trading volume. The Importance of Volume in Technical Analysis Volume is an important aspect of technical analysis because it is used to confirm trends and chart patterns. Volume precedes price. Volume is closely monitored by traders to form predictions of upcoming trend reversals.
Volume should confirm the trend. If the price is moving in a downward trend, the volume should also increase If the previous relationship between volume and price movements starts to deteriorate, it is usually a sign of weakness in the trend. Volume should confirm chart patterns.
If you think that a company is solid, but is just the victim of bad short-term news, it could be a great time to buy at a very low price. Price was moving down throughout Then, towards the beginning of points 1 and 2 below , we saw two big spikes in volume, during two down days. I actually bought this stock because the US government basically told everyone that they would not let Citigroup fail. However, at point 4, there was another huge spike in selling volume, but price failed to drop significantly.
That was a sign that most of the sellers were out of the stock, at that point. So that is how we can use volume to show us when a stock does not have any more buyers and might be ripe for a purchase. Next, volume can give you hints as to when a stock is being possibly accumulated.
This is one example of how we can see volume increasing, while price is basing. In the basing pattern, there are more green bars than red bars in the volume indicator. So this could be a good hint that price might start to turn around soon. The general idea is that if you see volume increasing in a trend, it is likely that you will continue to see price move in the same direction. It makes sense because as a trend gets going, more people need to pile in, to keep the trend going.
Here is an example of a trend in crude oil where volume increases in an uptrend. Although this is futures and not stocks, the same principle applies. Once volume starts to dry up, the trend reverses, soon after. Alright, now that you have an idea of how volume can be used in stock trading, let's jump over to Forex trading to see if these same principles apply. After reading the previous examples, you are probably ready to throw up a volume indicator on your FX charts.
Since there isn't a primary exchange that all transactions run through, there is no way to count how much currency is being traded at any one time. So what you are seeing on your FX charts is only the volume that your broker sees. This chart uses Oanda data and shows that the current volume is 8, currency units.
But when we look at an FXCM chart, we see a much different picture. This chart shows a volume of 50, currency units. If you look at the relative volume, the graphs are pretty similar, but they are not exactly the same. For example the right side of this chart shows a big spike. However, on the Oanda chart, there is actually a decline in volume.
Well, let's take a look at a few example to see if it could useful, even if you are only getting part of the picture. As you can see, price moved down on a lot of volume, but stopped short of a previous support point. After this spike in volume, price started to move up.
This is an example of a pretty long downtrend, followed by a basing pattern and an increase in volume. The volume increase could have been a clue that accumulation was taking place. Price shot up, soon afterwards. Here is an example that I found of a strong trend being reinforced by volume. As we saw with the oil example above, when volume starts to decrease, price starts to drop.
From those previous FX examples, volume looks like it could be a fairly useful predictor of future price movement. But hang on for a minute, those were a few well-chosen examples. The differences in market open times and volume are reflected in the intraday volume spikes.
Of course, this makes it harder to read than intraday stock volume. So volume might be able to give us some hints about where price is likely to go next. I spotted a very cute bullish accumulation pattern on EURJPY: the price keeps setting higher lows and equals highs respecting a strong horizontal resistance. To catch a bullish continuation, wait for a bullish breakout of Then a bullish move will be expected to If the price breaks a trend line of a triangle, the setup Price is testing resistance.
The Forex market is in a range most of the time. Therefore, I think that there may be a rollback from resistance. My goal is to support 1. Hello everyone Surely you have heard about automated trading. You may even have used it. Today I want to talk about the mistakes that people make using automated trading. Let's go! Eurusd has broken out of its descending channel and constently making higher market structure.
I am in for a long. The price enters a sideways range between support at 1. The price rolls back to support. The local trend is up. I look forward to growth from support. My target is resistance 1. The price breaks through a strong resistance level and enters a descending channel. A sign that the price will rise is when the price fixes above the support level. I expect growth after fixing. Price action has reached a resistance level We're considering taking a short trade from resistance.
Thanks for your support! Hey traders, One more bullish clue on AUDUSD: after the price reached a solid horizontal demand area, it bounced and broke a minor trend line with a high momentum bullish candle. That breakout signifies a strong bullish pressure. I expect a bullish continuation to 0. Bullish outlook explained. The trend is changing to an uptrend. The currency pair has formed a new global low and now we can probably see a big and strong increase. There is resistance at 1.
Get started. Videos only. AtlasTrades Premium. ProjectSyndicate Premium. Euro can finish way in channel soon. UnitedSignals Premium. ProSignalsFx Premium. TopTradingSignals Premium. EliteTradingSignals Premium. VasilyTrader Premium. Lingrid Premium. Errors in automated trading.
The Forex Charts offer over graphs in real-time with Forex Interbank rates, Cryptocurrencies, Commodities, Equity Indices and US stocks. Free trading charts for forex, major commodities and indices. Our charts are fully interactive with a full suite of technical indicators. CME Group's Exchange Daily Volume and Open Interest Report summarizes exchange-wide volume, including futures and options volume, for Globex, Clearport/PNT.