Trading Volume Indicator for MT4

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How the Trading Volume Indicator Works

Introduction to the Trading Volume Indicator

Volume, momentum, and market strength are key indications that price is about to move in a certain direction. The Trading Volume indicator is one indicator which can help traders objectively classify a momentum type of trade setup as one having volume and strength or not.

What is the Trading Volume Indicator?

The Trading Volume indicator is a custom technical indicator which works somewhat like a market sentiment indicator. It indicates the strength of the bulls and the bears of the market. What is unique about the Trading Volume indicator is that it makes use of trading volume as a basis for measuring the strength of the bulls and the bears.

How the Trading Volume Indicator Works?

As the name suggests, the Trading Volume indicator bases its measure of the strength of bulls and bears on tick volume in relation to price movements. Its measure of volume is also somehow based on the ratio of the body of the candle, whether it has to have moved up or down.

This indicator can be set to base its calculation of volume and strength based on Body Ratio, Bid Ratio, and Open Ratio. This can be modified on the “Calculation By” variable under the Inputs tab of the indicator’s settings.

Trading Volume indicator for MT4

This indicator displays its percentage reading of trading volume and market strength on the upper left corner of the price chart.

How the Trading Volume Indicator Works

How to use the Trading Volume Indicator for MT4

As mentioned earlier, this indicator is somehow very similar to a market sentiment type of indicator. However, this indicator is somehow geared towards the short-term since it bases its calculation on the candle that is currently forming.

As such, we can use this indicator to gauge whether there is an imbalance between the strength of the bulls and the bears. This will be based on having one side of the market having a significantly larger percentage over the other. This would mean that there is strong momentum in the direction indicated and we could trade a momentum trade in that direction.

Buy Trade Setup

When to Buy?

Identify a bullish momentum type of trade setup. Open the buy trade only if the bullish volume percentage is above 80% confirming the strength of the bullish momentum. Set the stop loss below the entry candle.

When to Sell?

Set the take profit on the next resistance level based on a major swing high level and allow price to reach the target.

How to use the Trading Volume Indicator for MT4 - Buy Trade

Sell Trade Setup

When to Buy?

Identify a bearish momentum type of trade setup. Open the sell trade only if the bearish volume percentage is above 80% confirming the strength of the bearish momentum. Set the stop loss above the entry candle.

When to Sell?

Set the take profit on the next support level based on a major swing low level and allow price to reach the target.

How to use the Trading Volume Indicator for MT4 - Sell Trade

Conclusion

This indicator does not provide trend or momentum reversal signals or even trend biases. However, it provides information regarding the strength of the market movement. This indicator can serve as a confirmation of a momentum type of trade setup.

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