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Buy And Sell Volume Indicator

buyer and seller

Volume is a very important concept in trading, especially to understand the strength of a trend. We have seen together the most common indicators, and also the most effective ones, which can help us to identify entry and exit points, or chances to short. These reversals usually happen when the two lines of the indicator makes a crossover. Second, you can use it in trend following and also combine it with other technical indicators. The chart below shows the Kilinger Oscillator applied in a chart.


Higher settings will make the volume indicator less sensitive to short-term changes in the price. Blue occurs in environments when a market spikes into 1 direction, often causing confusion about the trend direction. Pink indicates the beginning of a trend continuation or reversal. The tool was developed by Joe Granville and is used to detect whether the volume is bearish or bullish-oriented. OBV marks the particular volume of the day as bearish or bullish depending on whether the day has been bearish or bullish.

day trading

Hence it would help if you were cautious as this could be a possible bear trap. In other words, a bullish divergence forms when the OBV is rising while the stock is falling. However, in most cases, these divergences are usually hard to see.

Exhaustion Moves and Volume

Let’s take a look at some of the most common indicators around. A downtrend without increasing and/or above average volume implies investor concern is limited. While the stock’s price may continue to fall, traders who use volume analysis may start to follow the stock and watch for signs of a pickup supported by increasing volume. Smart money always seeks to mask its trading activities, but its footprints are still visible. Here is another strategy on how to apply technical analysis step by step. This tool calculates the number of ticks in which a currency moves up and down.


In addition, volume indicators can help confirm price reversal market structures, such as head and shoulder, double top, and others. The way a volume indicator behaves when the right shoulder of a head and shoulder pattern is forming can tell a lot about the setup. The same is true for a retest of the high in a double top setup. Furthermore, a divergence between the volume indicator and the price is a strong reversal signal.

The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world. During a consolidation, volume measurements typically are low. If volume picks up upon the break of that consolidation pattern , then the volume is confirming a higher chance of a sustainable breakout. By the way, there’s nothing wrong with a trading range market, as long as you can accurately identify the trading range. Volume AND open interest both decreasing favors lower prices or upcoming trend reversal.

Round Levels Indicator

Your ability to open a DTTW trading office or join one of our trading offices is subject to the laws and regulations in force in your jurisdiction. Due to current legal and regulatory requirements, United States citizens or residents are currently unable to open a trading office with us. Day trading is one of the most challenging ways to make money in the world. You’re trading against some of the smartest people on the planet – people who are smarter and more experienced than you. The MFI is very similar to the RSI, with the primary difference being the MFI incorporates volume, while the RSI does not.


For stocks, volume is measured in the number of shares traded. For futures and options, volume is based on how many contracts have changed hands. Traders look to volume to determine liquidity and combine changes in volume with technical indicators to make trading decisions. The money flow volume is a measure of the volume and where the price closed relative to the trading session’s range.

What does the on-balance volume indicator tell you?

When closing prices are in the upper portion of the day’s range, and volume is expanding, values will be high. When closing prices are in the lower portion of the range, values will be negative. Chaikin Money Flow can be used as a short-term indicator because it oscillates, but it is more commonly used for seeing divergence. Volume is added when the market finishes higher or subtracted when the market finishes lower.

This trading strategy uses two very powerful techniques that you won’t see written anywhere else. The percentage of volume trading strategy that is advertised is achievable with a great deal of discipline. Understanding volume trading will help you to get the most value out of this volume trading strategy. Conversely, if the CMF volume reading is below zero when we break a support level that is viewed as selling pressure. The difference between the Chaikin Money Flow and the standard volume is the math underlying each indicator. Secondly, the trading volume analysis is quite different as well as how the trading signals are interpreted.

A price decrease indicates that market participants are selling the stock. Both events occurring together (decrease in price + increase in volumes) imply that smart money is selling stocks. Going by the assumption that smart money always makes smart choices, the expectation is bearish, and hence one should look at selling opportunity in the stock.

When viewing a stock chart, volume may be found on the y-axis. Volume is a handy tool to study trends, and as you can see, there are many ways to use it. Basic guidelines can be used to assess market strength or weakness, as well as to check if volume is confirming a price move or signaling that a reversal might be at hand. Indicators based on volume are sometimes used to help in the decision process.

  • To calculate it, you take the total volume of trades over a particular time period and divide that number by the number of days.
  • It is said to be negative when its close is below the previous close.
  • There is always a bid price and an ask price in an actively traded asset which continuously fluctuates.
  • The ask price is the lowest current price a seller is willing to sell a security for.

Study them and add them to your analysis tools to improve your trading. The VWAP gives traders some insight about the trend and value of a security. Institutional investors use the indicator to assess whether they bought at a good price for the day or have overpaid for the stock. It’s good to note that this volume indicator is plotted directly on the price chart. The Chaikin money flow indicator is a volume indicator that measures the money flow volume over a chosen period, usually 20 or 21 periods.

OBV vs accumulation/distribution

For many, since price action and volume make up 80% or more of their trading strategies, a good volume indicator or two is a critical component of their success. If the current market has more taker buy volume than taker sell volume, it means there is a tendency to increase the price as more trades occur at the ask price. When the current market has more taker sell volume than taker buy volume, it means there is a tendency to push the price down since there are more traders selling at the bid price.

The OBV indicator was created based on the principle that greater volume behind a particular move means greater conviction. 10 million shares traded is more significant than 1 million shares traded, regardless of the direction. Although seeing volume with the naked eye is not difficult, interpreting the volume is. It’s very difficult to make quick, unbiased decisions based on only price action and volume – that’s where indicators come in. The Buy And Sell Volume Indicator compares buying volume to selling volume and gives a visual representation of the ratio between each.

A wide price range on low volume would imply an easy price movement since it didn’t take a large volume to move the price. The opposite is also true when there’s a small price range on high volume, showing difficulty in the price movement. For the most part, it will just oscillate between +0.4 to -0.4, with 0 as the centerline. Schwab does not recommend the use of technical analysis as a sole means of investment research. The investment strategies mentioned here may not be suitable for everyone.

The indicator was created by Gene Quong and is calculated using several steps. First, one needs to calculate the typical price by adding the high, low, and close and then dividing by three. Second, the person calculates the raw money flow by multiplying the typical price with the volume.

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