Volume Spread Analysis isa forex trading system based on the analysis of the volume. It contains the 6-step process I use. Click the link below and enter your email to get instant access to the cheat sheet. I was asked in an interview that I was doing recently, to provide the framework for my complete trading strategy.

Tradingview Volume Profile

I decided to put it all together in this article. Volume Cumulation Strategy. The main idea behind this strategy is to identify whether the large market participants are long or short. Better volume indicator has a number of features that facilitate this process. Better volume Forex indicator: peculiarities of work. The main feature of this indicator is that it takes into account several typical combinations of candles and volume quantities.

The indicators for each signal are color coded for your convenience:. The precise strategy on tick volume will allow to work in sync with the big capital, that is, to have time to enter at the beginning of a trend and exit or reverse at the first signs of a reversal movement. Forex Books. Hate losing money? Cancel a losing trade with easyMarkets dealCancellation. Visit easyMarkets. Volume is one of the key indicators used by active traders for gauging money flow. As you've seen in the examples above, indicators that are derived from using volume such as on-balance volume and volume by price can be used to create lucrative trading strategies.

You will need to place your stops slightly below the high to ensure you are not caught in a trap.

This strategy works for both long and short positions. The key again is looking for the expansion in volume prior to entering the trade. When a stock is moving higher in a stair-step approach, you will want to see volume increase on each successive high and decrease on each pullback. The underlying message is there is more positive volume as the stock is moving higher, thus confirming the health of the trend. This sort of confirmation in the volume activity is usually a result of a stock in an impulsive phase of a trend.

The volume increase in the direction of the primary trend is something you will generally see as stocks progress throughout the day. You will see the strong move into the 10 am time frame, a consolidation period and then acceleration from noon until the close.

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For this strategy, you will want to wait for the trade to develop in the morning and look to take a position after 11 am. As the stock moves in your favor, you should continuously monitor the volume activity to see if the move is in jeopardy of reversing.

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The speed of this setup is much slower versus the other strategies discussed in this article; however, the difficulty reveals itself in the increased number of false moves, which are commonplace in the afternoon. No more panic, no more doubts. Learn About TradingSim. These charts are just a sample of what happens far too often when it comes to afternoon trading. So, how do you find the stocks that will trend all day? I found a study on the web that looked at when a stock exceeded two standard deviations from its historical volume average, what would happen next.

The study concluded that it is better to be a buyer versus a seller. This volume spike will often lead to sharp reversals since the moves are unsustainable due to the imbalance of supply and demand. Trading counter to volume spikes can be profitable, but it requires enormous skill and mastery of volume analysis. These volume spikes can also be an opportunity for you as a trader to take a counter move position. You need to know what you are doing if you are going to trade volume spikes. The action is swift and you have to keep your stops tight, but if you time it right, you can capture some nice gains.

In the below example we will cover the stock Zulily. Notice how the stock never made a new high even though the volume and price action was present. This is a key sign that the bears are in control. The other setup with volume spikes are candlesticks with extremely long wicks. In this scenario, stocks will often retest the low or high of the spike. You can take a position in the direction of the primary trend after the stock has had a nice retreat from the initial volume and price spike. You will notice how the stock had a significant gap down and then recovered nicely.

Once the recovery began to flatline and the volume dried up, you will want to establish a short position.

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The stock then recovered and flattened out, which was an excellent time to enter a short position. So, how do you know when a trade is failing? Simple answer — you can see the warning signs in the volume. Above is the chart of Amazon and you can see the stock attempted to break out in the first hour of trading. Notice how the volume on the breakout attempt was less than stellar. The above example of ESPR would drive me crazy 6 years ago. Notice how the volume dries up as the stock attempts to make a lower low on the day.

The key is to get out if the price action begins to chop sideways for many candles. When you sit in a stock hoping things will go your way, you are better off making a donation to charity.

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At least the money will go to a worthy cause. The strategies discussed in this article can be used with any stock and on any time frame. The most important point to remember is you want to see volume expand in the direction of your trade.

Keep this in the back of your mind and you will do just fine. So far in this article, we have covered how to apply volume analysis to identify trading opportunities day trading. To demonstrate the ability to analyze long-term trends, we will use volume to unpack the roaring cryptocurrency market. Take a look at the infographic below where we have done some extensive research on volume trends across Bitcoin the last 4 years. Now, I get wealth is largely concentrated in the G8 countries, but this sort of multiple is a bit ridiculous. Early indications show that Japanese retail investors, mostly in their 30s and 40s are using leveraged accounts to trade cryptocurrencies.

This surge of cash inflows into the cryptocurrency market has resulted in the bitcoin blowing out record after record.

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While there is significant speculative trading going on to drive up the price, we cannot ignore the enormous value bitcoin will have in a global economy. As the world continues to get smaller, who wants to concern themselves with exchange rates and government fees. Shifting our focus back on the charts. You are likely thinking you are buying into the actual cryptocurrency market — not quite.

In case you missed the video in the above infographic, the SEC has not approved ETFs that invest directly in the cryptocurrency market. The two ETFs have stocks that are directly connected to the crypto industry. From the looks of things, there is little value in buying both ETFs for diversification as they are mirror images of one another.

These similarities are still relevant in the realm of volume. I do think these ETFs are a good way for someone to get involved in the world of crypto, without taking on all the risks. Now, with that said, if you are looking to take a long shot over the next 5 to 10 years, these ETFs are not going to give you the desired home run affect you are looking for. But from the look of the volume on the chart, it appears to me the ETFs will retest the all-time highs because there were so many trades placed at these levels.

Shifting gears back into volume analysis with stocks, the next bonus technique I would like to cover is using a volume overlay with the price. The overlay is slightly different from printing volume on the x-axis by allowing you to see where the concentration of orders took place.

This can provide you with a clear view into where there are many traders and you can then use this to validate a particular support or resistance level. The simple way of determining where to focus your attention is on the longest volume bar. Do you see how this view lets you know where all the trades were made for a given security? This layer of information is invisible with volume underneath the chart.

The point is you do not only want to use volume and price action. It is also great to add another validation technique like Fibonacci to the chart to gain clues of where the price is likely to break. Every time I look at the chart of the Dow, it takes my breath away. These folks are not natural price movements for the index in historical terms. On the slow run-up, there are many price swings, some of which might have thrown you for a loop in the last 2-years. Meaning, it would have taken serious self-control to stay in the trade.

However, once you overlay the volume you will see there are three key levels: 1 18,, 21, and 25, The 18, level has the most volume over the last 5 years. The index formed a nice double bottom over an month period leading up to the break of For all my Wyckoff traders, the back and forth at the 18, level created a ton of cause, which ultimately fueled the rally.

The next level is 21, Notice how the volume at the 21, level is high, but in relative terms over the last 5 years, the volume is light. Once 21, was broken, the Dow then ran up to over 26, The Dow is now bouncing around the 25, to 23, level. In relative terms, the 25, level is now the high-level volume zone which will act as resistance. We are probably headed towards the next volume support level down at 21, Next, if 21, does not hold we are headed back down to 18, Are you now able to see how volume on top of price allows you to cut through all the head fakes to see the same levels the smart money cares about?