Volumes Technical Indicators: An effective tool for insight into market dynamics

In the foreign exchange market, technical analysis tools are like beacons in navigation charts, guiding traders, so today I want to share with you a very practical technical indicator that is not often mentioned, but is very practical – Volumes. This indicator, in its unique way, reveals the power balance behind the market, helping traders better understand the internal logic of price changes.

Why is it “jump times”, not the transaction amount or lot number?

First, let’s make it clear: the forex market is a highly fragmented over-the-counter trading market (OTC), which means there is no central exchange to uniformly record and report the specific amount or lots of each transaction. As core participants in the market, large banks often regard their respective transaction volumes as sensitive trade secrets, so we cannot obtain a comprehensive and accurate transaction amount or lot count.

In contrast, the Volumes indicator focuses on the “number of jumps” of the price in each time period. On the MT4/5 trading platform, when you enable the Volumes indicator, you will see red and green cylinders appearing below the chart, which intuitively reflect the frequency of price changes in the current time period. A green cylinder indicates that the current cycle beats more times than the previous cycle, while the red is the opposite.

How to interpret Volumes indicators?

The key to Volumes indicator is to understand its appearanceInformation contained in color changes and numerical size. The emergence of green cylinders usually means that market activity increases and price changes frequently; while red cylinders may indicate that the market is calm and price fluctuations decrease.

More importantly, observing the fluctuations in trading volume can help us judge the health of the trend. As volume gradually increases and remains high, with prices moving in a certain direction, we can think of this trend as it is stable and sustainable. On the contrary, if the volume decreases with price fluctuations, this may mean that the trend is insufficient and the market is about to undergo adjustments or reversals.

Tips on using Volumes indicator

For beginners, it may not be intuitive to observe the color changes of Volumes cylinders directly. At this time, we can use MA (moving average) to further analyze. Add a MA moving average in the Volumes indicator window. By observing the relative position of the moving average and the cylinder, it is easier to judge the overall trend of the trading volume.

When the volume bar breaks through and continues to be above the moving average, it indicates that the market activity is increasing and price changes may be more powerful.

On the contrary, if the volume bar continues to fall below the moving average, even if the price breaks, it may be just a false signal, and traders should be careful.

Combination with other technical indicators

Volumes indicator is powerful, but not omnipotent. In actual operation, combining other technical indicators such as price patterns, trend lines, oscillators, etc., a more reliable trading signal can be formed. For example, during the market opening period, the Volumes indicator may soar briefly due to the participation of major global markets. At this time, it is necessary to combine other indicators to determine whether it is a real breakthrough or noise.

In addition, adjusting the time period of the chart is also the key to optimizing the effectiveness of the Volumes indicator based on your personal trading style and preferences. Whether it is enlarging or reducing the time cycle, it should be based on an in-depth understanding of market dynamics and a keen capture of trading opportunities.

In short, the Volumes indicator provides traders in the forex market with a unique way of understanding the market dynamics.Effect tool. Through careful observation and flexible application, we can better grasp the pulse of the market and improve the accuracy and efficiency of transactions. I hope today’s sharing will be helpful to everyone’s trading path!