Day trading with volume analysis on forex gives the day trader a heads up on where price is likely to go, regardless of whether trend trading or counter trend trading. However, the issue with most volume indicators is that they use a moving average or only plot the total volume or they are so complicated that it’s almost impossible to implement on the live edge of the market. The Directional Volume indicator is designed exclusively for day trading with volume because data providers only provide a limited number of days back for bid/ask data.
The Directional Volume indicator identifies the following:
- Total Buyers
- Total Sellers
- Delta at the end of the bar (in other words who won the fight)
Day trading with volume is now made easy because traders can see exactly who is controlling price at the end of the bar. When combining this with support and resistance, the trader has an enormous edge.
Day Trading with Volume Analysis Forex
For example, in the AUDUSD forex chart below, notice how the gray dots and plus sign provide either support or resistance areas. These are the areas that are critical for volume analysis. The first red line shows that as price approached the line of congestion dots, sellers decreased. In fact, on the last low buyers came in and controlled the low because the delta flipped to above the middle line. Then price made new highs and then decreased. A test for sellers was needed. As price was retracing to the plus sign, sellers did not continue their quest to take over forming divergence. Again at the top of the market buyers decreased and sellers managed to step in. When price approached the ATR (plus sign), initially they decreased and retested for buyers. Although buyers came in strong, they were unable to increase price. So price goes back down and flips the ATR to red but a congestion dot appears. Again, as they approach this support line, sellers decrease and price goes up to test the ATR. As price retraces to the ATR, sellers step in on each high. This indicates that price should go down and break the congestion dot at .7260. Click to expand chart.