today I'm revealing
how you can maximize your profits using the concept of volume so we all know
that in order to become a profitable trader you need to trade within a trend
but have you ever stopped and think about who is actually moving the market and
creating those trends traders tend to forget that there are other people on the
other side that is moving the market so you can have all these indicators and
trend lines but at the end of the day if there aren't any buyers or sellers a
stock will not move and a good way to know this is to look at the volume before
I start I'd like to give really important info that I rarely see from other
trading channels volume only works on the stock market it doesn't work on the
forex market
let me explain so a stock market is considered as a
centralized market meaning all the trades are routed towards one central
exchange however a forex market is considered as a decentralized market meaning
there is no one location where the currencies are traded so for example if your
broker is IQ option it will display a different volume than if you're using
forex.com because the volume that you're seeing is actually the volume that
people are trading with that particular broker let me give you an example if you
open trading view you can actually see that the broker is owanda meaning that
the volume you're seeing here is the volume that people are trading with the
owanda broker so this is why volume on forex is completely useless because the
main goal of knowing the volume is to know where big institutions are putting
their money and if different institutions have different brokers meaning there
is no exact way of identifying how much total money is put in a currency so in
this article
I'm going to reveal
how you can increase your chances of profits using a volume indicator that i
personally use which is the volume oscillator if you open the volume oscillator
on tradingview, this is what it looks like we have a plotline and a zero line
in the middle for the settings if you're trading using a longer time frame like
the daily chart you want to put your settings as 14 and 28 but if you're
trading a shorter time frame like the 15-minute chart then we're using the 5
and 20. so this is how you read the volume oscillator first you need to know
that volume doesn't indicate the direction of a trend a volume is basically
like the fuel or the energy so if the volume is low meaning that the momentum
is weak and if
the volume is high meaning the momentum is strong so to know
the direction of the momentum you need to look at price action if the price is
heading upwards and the volume is also increasing meaning that it's a strong
upwards trend and if the price is heading downwards and the volume is
increasing this means that it's a strong downtrend remember volume is like a
fuel so if the price is already heading downwards an increase in volume will
result in a stronger downtrend a volume can also tell you how strong a trend is
for example, if a price is on an uptrend yet the volume is constantly decreasing
meaning that it's a weak uptrend and you should be careful if you're taking a
buy position because this could indicate that the trend may come to an end it's
also the same for downtrends
if the price is on a downtrend and the volume is decreasing
meaning that the momentum to the downside is weak therefore you need to be
careful if you're taking a short position because a low volume could mean that
the trend is coming to an end so a good strategy that you can combine with
volume is with simple price action so here's the boeing chart and as you can
see the price moved inside a range here meaning you can draw support and
resistance line here and when the price was trading on a range we can see that
the volume is relatively low now look at what happened the price broke out of
the range area downwards while the volume started going up indicating an
increase in selling pressure to the downside so this is a good opportunity to
take a sell position so
let's move on to another chart here we have bank of America
and as you can see prices went down to this level and up again making this a
key support line and as prices went back to this level again we spotted a
bullish engulfing pattern which is a bullish signal and the volume oscillator
is also increasing so let's do a quick recap prices are at the support level a
bullish engulfing pattern formed against that support level and the volume
oscillator is increasing indicating a strong momentum to the upside so this is
a good opportunity to take a buy position so the key to having a profitable
trading strategy is making sure that all the signals are aligned you cannot
simply take a buy position because a bullish engulfing formed you need to take
into account other market factors like support and resistance so that's how you
combine volume with price action and now
I'm going to give you a bonus strategy using another volume
indicator called the money flow index so how the indicator works is very simple
if the line crosses above the high line meaning that the price is overbought
and is more likely to reverse to the downside and if the lines crosses below
the low line meaning that the price is considered oversold and is more likely
to reverse to the upside but like I said before you cannot simply buy or sell based
on the indicator alone you need to take into account other factors in the
market in this case we are also using support and resistance so let's jump into
a chart here's Netflix and as we can see prices approach this zone here and
it started to reverse making this a resistance level and now that prices are
back at the resistance level again this time displaying a fake-out where a
candle went up here and closes again below here and if you know basic
candlestick patterns
you will know that this is a shooting star which is a
bearish pattern next you can see a big red candle formed after that and also
the money flow index is at the overbought levels which further confirms that
the price is heading towards the downside so this is a good opportunity to sell
the market let's look at another example here we have amd and as you can see
when prices hit this level it reverses downwards making this a key resistance
level so as prices approach this level again we can see a slight momentum to
the downside while the money flow index is at the overbought levels making this
a good opportunity to take a sell position so I just revealed to you the best
strategies that you can use with two volume indicators.