In any Technical Analysis FORUM , discussion about Volume indicator are rare. In fact in my experience , this Volume indicator is useful .
In theory , the rising of Price it should be followed with rising of transaction Volume . On the other way decreasing of Price should be followed by decreasing of transaction Volume also. So, in case of the Price are moving up , but transaction Volume are moving down , it can be assume as false rising or false transaction. In this case the rising of Price may occur just because of movement from only a few of some speculative brokers , just for keep the Price in high level in order to saving their portfolio because they already bought when the Price are in Overbought condition. In fact the real of Supply – Demand is not that good.
Systematically the correlation theory of Price and Volume as follows :
- When the Price moving up, and Volume moving up , it means market
getting stronger
- When the Price moving up , and Volume moving down , it means market
getting weaker
- When the Price moving down , but Volume moving up , it means market
will getting weaker
- When the Price moving down , but Volume moving down , it means market
will getting stronger
Off course this method is not 100 % accurate . But according to my experience I can tell around 70 % accurate. It still useful as trading tools as well.
Practically to execute your decision in trading , you need to compare or combine one technical analysis method with others method , as I usually do in my HIMAWAN FOREX’s method.
To see how this correlation works , you can see these 2 charts below :
Chart 1 :
PRICE down VOL up = market getting Weaker
PRICE up VOL up = market getting Stronger
Chart 2 :
PRICE up VOL down = market getting Weaker
PRICE down VOL down =market getting Stronger
Happy trading !!
Himawan Wardhana
founder of HIMAWAN FOREX
