TradingView’s 5 Best Volume Indicators for Effective Trading

TradingView’s 5 Best Volume Indicators: Volume is the total volume of shares/lots traded in a particular security during a specific time interval. Traders need to understand key information about trading volume to analyze the price movements of securities for setting up good risk-reward ratio trades.

Here we will look at five of the best volume indicators from TradingView to help traders analyze securities with volume and price data.

value of volume

• High trading volume means there is interest from buyers and sellers in the security. When a security is in an upward trend with increasing trading volume, it is a sign that the security is likely to continue its upward trend.
• Likewise, increasing volume during a downtrend is a sign that the security is poised to continue its strong downtrend further.
• Low volume indicates a lack of interest. When a security is trending upward with decreasing volume, it means that momentum is strong but volume is low, which could cause the market to reverse quickly. If the market falls due to low trading volume, the opposite is also true.

TradingView Best Volume Indicator

1. Balance (OBV)

OBV (Out of Balance Volume) is a momentum indicator that uses volume flows to predict price movements. This is used to evaluate cumulative buying and selling pressure by adding volume on up days and subtracting volume on down days.

It is one of the first indicators to measure positive and negative flow. This indicator was developed by Joe Granville.

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If a security closes higher than its previous close, all trading volume for that day is considered increased volume.

If a security closes lower than its previous closing price, the day’s volume is considered bearish volume.

Here, the direction of OBV is more important than value.

• As the price of a security makes higher highs and lower lows, supported by volume, the OBV indicator follows the price direction of a continuation of the upward trend.
• When a security’s price makes lower lows and higher highs, the OBV indicator follows the price direction of a continuation of the downtrend as volume provides support.
• The difference between price and volume indicators can also help identify trends.

2. Fund Flow Index (MFI)

The fund flow index is a trading volume indicator that measures the buying and selling pressure of securities using price and trading volume data. It is similar to the RSI indicator, but RSI only considers price data, while MFI includes volume.

This indicator helps identify overbought and oversold areas of a security and trend reversals.

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The Money Flow Index indicator ranges from 0 to 100, and when a security’s price fluctuates above 80, it is considered overbought territory. A price reversal towards the downside can be expected here.

If the price of a security fluctuates below 20, it is considered oversold territory. A price reversal in an upward direction can be expected.

Another way to trade with money flow indices is to find the difference between the price and the indicator.

If the price of a security is making higher highs and the indicator is making lower highs, this describes a bearish divergence and a downward price trend is predicted.

If the price of a security makes lower lows and the indicator makes higher lows, this describes a bullish divergence and an upward price trend is predicted.

3. Volume Weighted Moving Average (VWMA)

A volume-weighted moving average is a volume-based indicator that uses a moving average of a security’s price and volume.

A moving average represents the average price movement of a security over a specific time interval.

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The VWMA indicator helps identify trends, support and resistance, and price reversals by taking price support volume into account.

• If the price of a security is above the VWMA indicator, it indicates an upward trend and you can enter a long position.
• If the price of a security is below the VWMA indicator, it indicates a downward trend and you can enter a short position.
• When price repeatedly retests the VWAP line, it acts as a support or resistance line to ride the trend for higher profits in a trending market.

4. Accumulation/Distribution (A/D)

Cumulative distribution is a volume-based indicator that uses a security’s volume and price data to determine price trends.

Accumulation means buying (demand), distribution means selling (supply), and indicator lines predict price movements by measuring the supply and demand of securities.

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The direction of the oscillator is more important than the value at which it oscillates.

• When both the price and the A/D line make higher highs in the same direction, it indicates that the uptrend will continue.
• When price and the A/D line both make lower lows in the same direction, it indicates that the downtrend will continue.
• In range-bound markets, when the A/D line begins to increase, the cumulative range of the security may deviate in an upward direction. If the A/D line begins to decline, the security’s distribution range may deviate in a downward direction.

5. PVT (Price Volume Trend) indicator

Price Volume Trend is a volume-based indicator that uses a security’s price and volume data to determine price direction and strength.

The trend strengthens as volume supports the prices seen in this indicator. It is similar to the OBV (Out of Balance) indicator in that it measures the cumulative trading volume of a security.

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• Rising security price and price volume trend indicators confirm that upward momentum is continuing.
• Falling security price and price volume trend indicators confirm that downward momentum is continuing.
• A bearish divergence, which suggests a downward price movement, can be seen when the price is making higher highs and lower lows on the indicator.
• A bullish divergence, which suggests a rising price, can be seen when the price makes lower lows and higher highs on the indicator.

Finishing

You understand the best volume indicators. It is important to consider trading volume when developing a trading strategy. Volume indicators built into Trading View help traders analyze price action through volume analysis.

As part of technical analysis, it is recommended to consider volume analysis or volume-based indicators along with other technical tools to gain a better perspective and good risk reward with proper risk management.

Written by Deepak M

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