Trading volume in financial markets is the only variable that directly reflects the actual level of market activity. Available research data suggests that most day traders are NOT profitable. You will apply the confirmation techniques you just learned to confirm trends, breakouts, false breakouts, and reversals but now it’s simply on a daily chart. This can provide you with macro context for your intraday setups.

Price might whipsaw violently, creating huge volume without clear directional conviction. When volume diverges—trend continues but volume declines—tighten stops and prepare for potential reversal. The challenge is that CVD requires actual trade-level data (which side initiated each trade), not available on most forex platforms. If you have access through a quality broker or platform, CVD provides incredible insight.

In forex, most retail platforms show tick volume (number of price changes) not actual traded volume. If price breaks resistance but volume is meh—below average or barely above—walk away. Those breakouts typically fail within hours, and you’ll get a better entry when price returns to the range. Low volume environments also create danger because they’re illiquid. A single large order can push prices dramatically without much underlying shift in sentiment. Be cautious trading breakouts or breakdowns on abnormally thin volume—they’re often false signals.

Strategy 3: VWAP Mean Reversion

According to the United Nations COMTRADE database on international trade, China’s exports to Japan were U.S. $165.82 billion in 2021. China exports to Japan – data, historical chart, and statistics. After you’re consistently profitable using basics, gradually add complexity. Let each addition prove its value before adding another layer. Understanding the human behavior volume reveals makes you a better trader. Does the move continue with sustained volume, or did that one spike mark exhaustion?

The difference between Volume, Turnover, and Market Cap

• A practical example of applying this indicator can be seen on hourly charts.
• These periods often account for significant daily volume.
• The figure, written at the end of the day, is also called an estimate.
• This creates instant visual feedback about whether price moves have volume backing.
• Breakouts on heavy volume often differ from those on light volume in terms of follow-through.

Compare current volume to recent average volume for that pair and time of day. Most platforms show a moving average of volume (often 20-period) as a reference line. Context matters enormously—what’s high for USD/CAD might be normal for EUR/USD. Build a mental database of typical volume ranges for pairs you trade regularly. If the daily chart shows OBV trending higher but the 4-hour chart shows recent divergence, you’ve got conflicting signals worth monitoring.

Average Daily Trading Volume (ADTV)

• It shows how many units of an asset such as a stock, currency, or cryptocurrency were traded in each candlestick, without differentiating between buying and selling transactions.
• The volume of trade in stock market can be directly related to the liquidity level, where a higher volume signifies more buy and sell going on because the market is liquid.
• Volume analysis and auction market theory are at the core of order flow trading.
• You’ll also find real-world examples to illustrate how volume can support your decision-making — without relying on guesswork.

Many scalpers successfully use VWAP mean reversion on 1-5 minute charts. Just understand that volume on very short timeframes includes more random fluctuation, so confirmation becomes even more important. If USD/CAD is approaching an HVN from below, I expect it to slow down or reverse there, because many traders have positions around that price and will defend it. If it breaks through an HVN on strong volume, that signals conviction and often leads to extended moves.

Types of Stock Volume Measurements

RSI, MACD, and Stochastic oscillators measure momentum and overbought/oversold conditions. Support and resistance levels become more reliable when volume validates them. If GBP/JPY approaches resistance that previously stopped rallies, watch what volume does. But if only one indicator shows something interesting while others contradict it or stay neutral, proceed cautiously. Best gold stock The market might not be giving you a real signal—could be noise or an indicator quirk. I watch for VPT to break its own trendlines before price does.

What’s the best volume indicator for beginners?

The rules and regulations regarding the usage of the volume of trade by financial markets traders are set in the US by the Securities and Exchange Commission (SEC). In the United Kingdom, the Financial Conduct Authority (FCA) performs the function. Many traders use Saxo Bank International to research and invest in stocks across different markets. Its features like SAXO Stocks offer access to a wide range of global equities for investors.

How is the Volume of Trade Expressed?

Trading volume in financial markets is one of the primary tools for tracking the behavior of large institutions such as banks, investment funds, and whales. Use a screener to spot stocks with abnormal volume, or set alerts to notify you when volume crosses a key threshold. In practice, most experienced traders use 1 or 2 indicators — often just to confirm what they’re already seeing on the chart. A rising market with strong volume usually means buyers are active and engaged. Trading carries significant risks, including the potential loss of your initial capital or more. Most traders lose money, and trading is not a guaranteed path to wealth.

This volume is a very important indicator of liquidity and activity level taking place in the market. The volume of trade is a very important parameter for trading. It acts as one of the important technical indicators for traders based on which they can decide whether to enter into a trade or exit from a business. All the stock market exchanges calculate and provide this information. Volume indicators use different mathematical formulas but share common principles.

If it breaks through on heavy volume, you’ve got a legitimate breakout worth trading. The most reliable volume climaxes combine massive volume with a wide-range bar (big distance between high and low) and price reversal. If that happens after an extended trend, start thinking about trading the opposite direction. These typically happen on major news events or when a trend reaches its emotional peak. If NZD/USD has been falling for weeks and suddenly plunges on volume five times average—with everyone panicking out of positions—that often marks a selling climax. Once every scared seller exits, there’s nobody left to push it lower, and the pair bounces.

But used well, it helps you filter out weak breakouts — and spot when a trend still has room to run. Volume patterns on a 1-minute chart won’t behave the same as on a daily chart. If you enjoyed this post, you probably will be interested in order flow trading. Volume analysis and auction market theory are at the core of order flow trading.