Volumes is the most «sensitive» subject of the Forex market. With time, any trader starts to realize that the volumes present in the terminal are tick volumes and have nothing to do with the real volumes. The real currency volumes that pass through the market are unknown. Therefore, some suggest to take into account the volumes of the currency futures that are traded on the stock market.
But, as it turned out, not the values of real or tick volumes matter, but their dynamics. What is important is how they change over time and how the current volume values correspond to previous ones. This fact was the basis for the FxC Volume indicator. Its calculation formula is based on the analysis of price changes, which allows the approximate the dynamics of this indicator to the dynamics of the currency futures volumes.
Additional Features of the Indicator
- Adaptive analysis of the volumes dynamics
- Ranking the volumes
- Identification of support and resistance ares
- Identification of reversals
- FxC_Analysis=true - analyze the dynamics of volumes; false - do not analyze the dynamics of volumes.
Points to remember for trading
The indicator histogram is colored in three different colors. Light blue colors marks "low volumes". Blue color marks "high volumes". Violet color marks "extreme volumes". The significant volumes for trading are the ones preceding the reversal and also the volumes during the reversal of impulse movements.
- If the formation of the reversal was preceded by low volumes, when the price approaches this reversal again, it has a greater probability of breaking this area and less probability to roll back.
- If the formation of the reversal was preceded by high volumes, when the price approaches this reversal again, it has a greater probability of rolling back from this area and less probability to break it the first time.
- If the formation of the reversal was preceded by extreme volumes, when the price approaches this reversal again, it has a greater probability of another reversal and less probability to break it.
Your trading plan should be constructed as follows:
1) Open any currency chart at the start of the trading day. Select a working timeframe. Then select a higher timeframe, according to the table 1.
Selection of the higher timeframe
Working timeframe/Higher timeframe
- М1 / M5
- М5 / M30
- М15 / H1
- М30 / H4
- Н1 / D1
- Н4 / W1
- D1 / W1
- W1 / MN1
- MN1 / -
2) On the chart of the higher timeframe, look for reversals that were formed at or preceded by extreme volumes. 300 bars are sufficient for the analysis. As soon as they are found, draw the levels (areas) based on the bar "wicks". If a downward reversal was formed, use the upper wick (upper shadow). If an upward reversal was formed, use the lower wick (lower shadow). If the new reversal was formed in existing area, then it is not redrawn and new area is not drawn. If the new reversal was formed on extreme of high volumes and in existing area, then this is a sure sign that the area is still relevant. If such a reversal was formed on low volumes, then this is a sure sign that the area is losing its relevance, and thus is likely to be broken.
Interesting point! The areas formed by the extreme volumes can serve as support and resistance areas (depending on where the price is located relative to them).
The area is considered irrelevant if the price had crossed it multiple times and had not stopped on it.
3) Next, switch to the working timeframe and perform the same plotting.
4) Once the plotting is completed, there will be support and resistance areas, where the reversal probability is higher than the probability of their breakout.
Thus, the entry points are located within those areas.
First two screenshots show the comparison of volumes of the 6Е futures and the EURUSD pair
The middle two screenshots show the comparison of volumes of the USDRUB pair (MICEX data with real volumes) and the USDRUB pair (Alpari)
The last four screenshots show the triggering of support and resistance areas, which were plotted based on reversals with extreme volumes.