The volume indicators are the important analytical tools, which are needed in work of any trader. If we consider currency and stock exchanges, the showings of volume for traders will be represented in the different forms. The stock exchanges provide complete information about the type and the amount of stocks that were bought. The exchange markets are organized somewhat different, but they show the overall volume of deals concluded by traders for the particular period of time. This information undergoes an analysis and aids in the drawing up of the estimated figures of the price movement.
Main point of volume indicators
Usually, people ask themselves: what can be provided by the understating of the amount of overall deals in the market currently? In sober fact, this is a very important showing that can describe the entire market, as well as every element of the market. The following regularities which are important in the technical analysis of a market can be accentuated:
- Volume indicators decrease its showings. This sequence of events warns an investor that the majority of traders are no more interested in this asset, and it allows concluding that its transition to the flat condition may occur. The market is unpredictable at this time because it is driven by the small volumes. It means that the asset itself is very sensitive to any oscillations, and even the small speculators can expose the asset to these oscillations.
- Volume indicators increase its showings. In this situation, the growth of demand for the asset is observed, and it means that the market has the potential to create the strong movement to the particular direction. At this time, traders look for the opportunities to buy a lot in the direction of the emerging trend.
- The volume indicators are located in the extreme points. Such positions are determined based on the experience when a trader marks the maximum and the minimum points, which also appear to be the signal points, for each asset. As soon as the volume showings reach these points, we can conclude that the price will reverse soon and start looking for the point to entry into the market.
Another additional property of the volume indicators is their response to the occurring events and the search of divergences by traders. It occurs when there is the difference between the movement of the asset’s price and the showings of a tool. For example, quotes grow steadily, but volumes decline. It allows detecting some sort of divergence that shows a weakness and an irrationality of the movement. It allows looking for the possibility to buy the lot in the opposite direction.
Thus, we want to conclude that the volume indicators are the important parts of the technical analysis, which may provide the priceless information for a trader.