If you make decisions based on the volume of traded financial assets within a given timeframe, you will need volume indicators. They help to measure how much of a chosen financial instrument has been sold or bought. What's more, a volume indicator makes it possible to see how many contracts and CFDs changed hands. This is where online charts and patterns become the dominating force to measure and trade volume.
Those who use technical analysis are well aware of the important role volume plays when examining various patterns. Additionally, it can be used along with some major technical indicators to have an in-depth market overview.
In this article, we will highlight some of the most popular and effective volume-based indicators for enhanced trading.
Top 3 volume indicators to consider
Each volume indicator represents a math formula that is visually plotted on a trading chart or pattern. There is a different formula for each particular indicator. For this reason, they should not be considered as a single flexible solution for every strategy. A trader is supposed to choose the one that meets his or her trading tactics. Selecting an indicator will also depend on the market approach.
You are not obliged to use any of the following indicators. They do not guarantee success. On the other hand, they deliver better decision-making and market overview. So, here some of the top ones:
- OBV – the On-balance volume indicator is perfect for beginners. It does not require special skills or manipulations. Not only does it show divergence, but also depicts volume added or subtracted when the market finishes higher or lower.
- Klinger Oscillator – it helps to identify fluctuation in the area below or above the zero lines. What's more, it makes it possible to calculate the sum of buying and selling volume within a given timeframe.
- Chaikin Money Flow – is a type of short-term volume indicator that is able to oscillate. Traders use it to keep an eye on prices rising along with the rising volume and vice versa (prices finishing lower with a lower volume of daily range traded assets).
Talking about indicators, the most convenient way to use them is to install MetaTrader 4 to your computer and test indicators on a free Demo account with demo-balance 5000$ on it. Right after you go through a quick registration process, you will be able to download MT4 inside your Trader's Room.