Volume and how to read it

I am trying to understand how volume can help me to confirm that a trend is losing force and potentially reverse. I do not intend to use this as primary confirmation, more as a secondary. I trade the daily chart, and I guess the first question is, what is the definition of low volume, I did some backtesting using the standard Volume indicator on MT4, sometimes at 60000, the trend seems to be still while 35000 seems to have the strength…

The second question, how many days of low volume would indicate that perhaps is time to get out of the trade? During a trend, there is always a day with low volume, but that could mean many things.
I understand that there is no mathematical answer otherwise anybody would be mechanically applying it,
so perhaps is more of a general question as to how you guys use it.

Thanks, Nic

I am surprised that no one tried to take a stab at this. Probably because I did not ask the right question, let’s try again…

Why is everyone (ao at least a lot of people) keep saying that you should not trade if there is no volume
and how do you quantify volume?

Thanks

Ok, I am going to tag @dpaterso to take a crack at this. You there?

I guess it depends on how you’re trying to trade. If you’re going for a long term, trend following trade, then it really doesn’t matter all that much. If you’re going for short term trades (few minutes or hours) then you’ve got a couple of problems with low volume:

1 - big spread
2 - Movement will be slow if not much trading happening.

@TradeViper may chime in as well …

I trade only daily chart. I check the charts once a day for a possible setup or to close a trade if my indicator say so. A trade for me can be open up to two months.
I do not trade short time frames, but I read that Volume is always important.
I have also started to watch videos from the “No nonsense Forex” and he also indicates that volume is
extremely important on a daily chart.

Unlike the equities markets, there is no central exchange for the forex market. It is a decentralized market. Any volume information you may have in your feed comes from your broker. So, that volume is a representation of the buy/sell activities of the broker’s clients only. It does not represent the volume of all participants trading that pair all over the world.

Just because “No Nonsense Forex” is named as such it does not guarantee a nonsense-free channel of information. Unfortunately, the trading universe (forex, cryptos, equities and all other markets) are rife with people expounding useless theories.

Wading through misinformation and noise surrounding trading is very difficult indeed. Absorb everything you hear/read and then verify it on the charts and through your own experience. Question everything and then keep what works and throw out the rest.

Well actually there are traders who take positions in low volume - if the market is quiet on an instrument then think why - is it waiting for a reason, usually an outcome of a particular news result - say NFP.

It is true that there is no specific volume measure in FX, aside from tick volume, but tick volume gives a sense of activity - the market waits so the orders slow, but they build.

Below a daily chart of cable - around the pink line ( you need to go back to Dec 2018 to see why it was placed there) it is possible to see a drop in volume.

You can see that the drop was in the lead up to the UK PM election, then you can see the positioning during that period, or rather the result of that positioning.

Cable_Boris

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