In other markets specific volume is needed for a flag or pennant pattern to be valid. Since there is no live volume in FOREX should i be making an adjustment to validate this pattern or just rely on price action as it comes? Does anyone put any faith in the volume indicators that come with MT4? As far as i understand they are based more on momentum than actual volume.
Hi Nubs,
Most volume indicators on forex platforms including MT4 use tick volume as a proxy for actual volume. That means they count how frequently the price changes. As such the volume data will vary from one platform to the next. However, as long as you stick to one platform to compare apples to apples in terms of tick volume readings, you should be able to use the volume indicator to compare activity during the formation of the flag pattern to what the activity was like at other times to get some relative measure.
Good trading!
Jason
Nice post! Thanks Jason. Would you be able to elaborate on how exactly that tick volume is calculated?
Below is a chart that shows the tick volume on the Trading Station platform. Since this is an hourly chart, each bar of the tick volume indicator tells how many times the price changed (ticked up or down) during that hour.
You can see that the peak hours are typically between 8am and 12pm New York time (blue lines). It’s notable that 2pm on January 30th (yellow line) had higher tick volume than is typical of afternoon trading because of the FOMC announcement.