Trading with MT4 Forex Volume Indicator
Stock and commodity markets have routinely used volume to gauge how much buying or selling pressure is being applied to the market at a given time. A Forex volumes indicator would be very useful for the Forex market, but Forex historically has not had any direct measure of the volume in the entire Forex market. The decentralized nature of the Forex market makes it impossible to bring all the volume data together in the same way that centralized exchanges like the stock market and the commodities can. What information can be collected by the large interbank liquidity providers is treated as proprietary information, not be shared with the general public.
Despite this impossibility of gathering whole-market data on volume in the Forex market, MetaTrader 4—the most popular Forex trading software in the world—offers a volume indicator in Forex. How does such a volumes indicator work? What do you need to know about the MT4 volume indicator and does it really give a good view of the volume in the entire Forex market?
How Does the Volume Indicator in MT4 Really Work?
The truth is that the volume indicator does not actually measure volume directly. What it does do is count the number of ticks in a given bar. Therefore, the indicator is not so much a trade volume indicator as it is a tick volume indicator. But it provides the same insight into the buying or selling pressure that is taking place in a market.
What you Need to Know about Forex MetaTrader 4 Volumes Indicator
How to Interpret the Volumes Indicator MT4?
Sticking to the default color scheme, when the volume for a period is greater than the volume of the previous bar, the bar is green. When it is down from the previous period, the bar is red.
Evaluating the Strength or Weakness of a Trend Using Volume Indicator in Forex
If the bars continue to increase, it offers confirmation that the current trend is strong. Or if the bars cycle between up and down or continue to fall, it can suggest the trend is a weak one. You can use Bollinger Bands or Keltner channels along with the volume indicator as further confirmation that breakouts or breakdowns are indeed happening.
What you Need to Know about Forex MetaTrader 4 Volumes Indicator
Identifying Support and Resistance Using MT4 Volume Indicator
- Areas of strong volume mean that there is an increase of interest in the market at those price levels; This is highly indicative of support or resistance levels;
- The increased volume can be enthusiastic buyers exhausting themselves in an uptrend or eager shorts wanting to get in what they believe is the top of the market.
The volume indicator MT4 is just another tool that we use to establish points in the market where we have a statistical advantage. Vladimir Ribakov has done an excellent job breaking down correlations in the Forex market between the MT4 volume indicator and trends, reversals and false breakouts.
Conclusion
Forex does not have a centralized exchange where true volume information can be collected. However, the MT4 volume indicator simulates volume by measuring the ticks that occur for each period of time. You can use this indicator to find advantages in the market and gives you another tool to judge the strength or weakness of a trend.
