Here a sweet thank you text for you for sharing your secret with me, its my pleasure that you count me as your close one here in this forum. Thank you once again my friend for all you doing for me and off course for all u doing for all of us.
Originally Posted by ilearn2t
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Last edited by cafedeart; 02-19-2012 at 06:17 AM.
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Volume indicators are mathematical formulas that are visually represented in most commonly used charting platforms. Each indicator uses a slightly different formula and, therefore, a trader should find the indicator that works best for their particular market approach. Indicators are not required, but they can aid in the trading decision process.
Volume is a measure of how much of a given financial asset has been traded in a given period of time. It is a very powerful tool, but it's often overlooked because it is such a simple indicator. Volume information can be found just about anywhere, but few traders or investors know how to use it to increase their profits and minimize risk.
In a rising or falling market we can see exhaustion moves. These are generally sharp moves in price combined with a sharp increase in volume, which signal the potential end of a trend. Participants who waited and are afraid of missing more of the move pile in at market tops, exhausting the number of buyers. At a market bottom, falling prices eventually force out large numbers of traders, resulting in volatility and increased volume. We will see a decrease in volume after the spike in these situations, but how volume continues to play out over the next days, weeks and months can be analyzed by using the other volume guidelines.
Volume can be very useful in identifying bullish signs. For example, imagine volume increases on a price decline and then price moves higher, followed by a move back lower. If price on the move back lower stays higher than the previous low, and volume is diminished on second decline, then this is usually interpreted as a bullish sign.
After a long price move higher or lower, if price begins to range with little price movement and heavy volume, often it indicates a reversal.
On the initial breakout from a range or other chart pattern, a rise in volume indicates strength in the move. Little change in volume or declining volume on a breakout indicates lack of interest and a higher probability for a false breakout.
Volume indeed cannot be calculated based on the number of contracts traded and the size of those contracts since Forex market is decentralized by its nature. Volume is calculated based on price ticks. 1 tick is 1 volume. As price changes back and forth, volume adds up. High volume will have lots of such simple tick shifts, while low volume - very little.
The ADX (Average Directional Index) was developed by J. Welles Wilder. ADX is one of the technical indicators to help determine if the market is ranging or trending. Please note that this indicator only indicates the strength of a trend and not whether the market has uptrend or downtrend.
ADX or Average Directional Index tells us if there is a trend (up or down) or the market is moving sideways or in range. Please note that the explanation here is focused around Forex trading but the same is equally valid for stocks of any commodity trading.
Trading with ADX indicator involves the following signals:
ADX staying below 20 level — there is no trend or the trend is weak.
ADX moving above 20 level — The market is running in range (ranging).
ADX passing 40 level — trend is extreme.
ADX value rising — trend is going stronger, falling — trend is weakening.
+DI stays on top of -DI — uptrend is in place.
-DI stays on top of +DI — downtrend is in place.
Two DI cross — trend is changing.
It may be a good idea to take the decision after noting the ADX on bigger time frame say daily chart before taking a decision on shorter period chart, say hourly chart. Bigger time frame chart will give us a broader picture of the longer term trend. In simple words the short term chart may show that the trend is weakening but a longer term chart may say that the drop is just a temporary correction and the trend still exists.
ADX is calculated as follows:
ADX = SUM[(+DI-(-DI))/(+DI+(-DI)), N]/N
N = The number of periods used in the calculation (i.e. 14 period on a hourly chart means 14 hours and 14 period on a daily chart means 14 days)
A buy signal is generated when the +DI line of ADX (Average Directional Index) crosses up over the -DI line.
A sell signal is generated when the -DI line crosses up over the +DI line.
When the subsequent high or low points (peaks and valleys) of ADX line are going lower than the previous peaks. It may give a good signal for an emerging down trend. Similarly if the subsequent high and low points (peaks and valleys) are going higher than the previous ones, it may give a good signal for an emerging uptrend.