Typically, volume indicators (or psychological indicators) are rarely used in trading. The main reason for this is that the tools don’t allow to identify exact points of entry/exit, but are most commonly used to receive general information about the market. Better volume Forex Indicator is no exception to this rule.
Actually, any volume indicator provides the trader with the same information: the amount of money brought to the market at a particular point of time. This is the first sign that the big players entered the market and the situation may soon change dramatically.
When working with volume indicators, you should pay attention to two parameters: the volatility of the currency pair (distance between the candle’s high and low), as well as the value of the volume on the indicator. The sharp rise in the volume indicator suggests that the considerable amount of money was brought to the market, which can lead to a reversal of the trend, or at least to the end of correction.
The main difficulty lies in the correct identification of the received signal, because it is necessary to take into account both the readings of the indicators and the volatility of the pair in a certain period of time. Better volume indicator has a number of features that facilitate this process.
Better volume Forex indicator: peculiarities of work
The main feature of this indicator is that it takes into account several typical combinations of candles and volume quantities. The indicators for each signal are color coded for your convenience:
blue: indicates the absence of signals;
yellow: used to label the candles with very low volume. The decrease in volumes suggests that market makers have left the market, and hence either the trend is played out or the completion of the correction is nearing;
red: a combination of a bullish candle with a large spread and large volume. Characteristic of the origin of the bullish and completion (or correction) of the bearish trends;
green: appears before the completion of the trend. Represents a combination of a small candle and a large volume;
white: appears at the origin of a downtrend, as well as during the correction or completion of a bullish trend. It is expressed as a combination of a large bearish candle and a significant volume on the chart.
purple: a rare signal, expressed as a row of candles with a large volume on the chart.
The peculiarities of the indicator should include the addition of the moving average with a period equal to 100 by default, which is used as a secondary filter. When the bar crosses it, the force of the received signal increases.
Setup and use of better volume indicator
Setup of the indicator is similar to installation of other indicators – all you need is to copy the files with .ex4 and .mq4 extensions to the “indicators” folder. To get started, you need to drag the indicator to the price chart of the corresponding currency.
The settings of the indicator include such parameters as the color for each of the above signals, the period of the moving average (100 by default) and the number of candles that the indicator uses to calculate each new bar. By default, the indicator analyzes the data for the previous 20 candles, and this value is recommended to leave unchanged for any timeframe.
Better volume Forex indicator, just like any other volume indicator, does not give a clear signal to enter the market. Therefore, it can only be used in combination with other tools – for example, to determine the completion of the trend movement and timely profit-taking.
The occurrence of one of these signals should only alert a trader and make them more closely monitor the situation in the market. It is better to give the priority in making deals to the usual signals – for example, if the white bar appeared on the chart, it is better to wait for the breakthrough of the trend line. It is recommended to open the short position in this case only on the retest of the broken support line.
Integration of better volume indicator into trading system
The indicator under review can be integrated into almost any trading system. It can act as a decent filter of the false signals and help close the deal with maximum profit in time. Therefore, it can be used both in indicator-only strategies and in trading with the help of the wave or technical analysis.
The trading system under review mainly uses technical analysis, Fibonacci levels and the Stochastic Oscillator. The indicator is used to search for divergences and the points the correction completion. Special attention is given to candle combinations.
In this example, the main signals to make a deal are: the retest of the broken trend line, the level of correction of 50% from the last upward movement, the fast Stochastic line crossing the slow one upwards in the oversold area.
If you add the better volume Forex indicator to the trading system, you will get another signal to enter the market. And it is clear that the indicator reported the near completion of the correction before the Stochastic did and before the retest of the trend line. Then the confirmation was received: a green bar.
Pros and cons of using better volume indicator
In some cases, this indicator makes it possible to minimize losses or to make a deal at the beginning of the emerging trend. In the meantime, the usual analytical tools may fail to give clear signals to make a deal.
In the example, the green bar tells at least about the beginning of the correction. This would allow to earn about 70 points. We should also note that the beginning of this correction is only identified by the better volume indicator, while Stochastic is slightly below the overbought area at the moment.
The main drawback of the indicator is that it sometimes gives absolutely illogical signals. Generally, it is observed in the cases when the candle preceding to the signal has a very large body. This confuses the indicator, because it analyzes the previous 20 subsequent bars to calculate the next one.
It is because of such shortcomings that the better volume indicator can’t be recommended as the basis for the trading system. But despite this, it can effectively be used as a reliable filter for the received signals.Social button for Joomla