Volume Indicator for Candlesticks
The Volume Indicator for Japanese candlesticks measures how much of a given financial asset trades in a set period. For stocks, volume is measured by the number of shares traded; for futures and options, volume depends on the number of contracts that changed hands. Its features are as follows: See also our guide to Price Action on Candlestick Charts.
- A highly effective and powerful indicator, free of charge
- Shows the volume of each candle individually
- Plots candle volume as bars and numbers on the chart for every candle
- Displays daily volume
- Useful across all currency pairs and timeframes
- Compatible with: MetaTrader 4
What Volume Means
Over time, the Volume Indicator for Japanese candlesticks helps identify the strength or conviction behind the rises and falls in specific stocks and entire markets. The same applies to options, currency, and commodity traders, since trading volume points to current interest in an option. In practice, the Volume Indicator for Japanese candlesticks plays an important role in technical analysis and features prominently among several key technical indicators.
Key Points for Using the Volume Indicator for Japanese Candlesticks
- The Volume Indicator for Japanese candlesticks measures the number of shares traded in stocks, or the number of contracts traded in futures or options.
- The indicator can point to market strength: rising markets accompanied by increasing volume are seen as strong and healthy.
- When prices fall while volume increases, the downward trend is gathering strength.
- When prices on the Volume Indicator for Japanese candlesticks reach new highs without new lows on falling trading volume, be careful — a reversal may be forming.
- On-Balance Volume (OBV) and the Klinger Oscillator are two examples of charting tools built on the Volume Indicator for Japanese candlesticks.
- The volume indicator is not limited to one platform — it can also be used on TradingView.
Basic Principles for Using the Volume Indicator for Japanese Candlesticks
When analyzing volume, there are usually guidelines used to determine the strength or weakness of a move. As traders, we tend to favor joining strong moves and avoid moves that show weakness, or we may watch for an entry against the direction of a weak move. These guidelines don’t apply in every situation, but they offer general guidance for trading decisions.
- Trend confirmation: a rising market should show increasing volume when read on the Volume Indicator for Japanese candlesticks. Buyers need growing numbers to keep pushing prices higher, so a price increase paired with falling volume can signal a weakening trend — a warning of a possible reversal.
- Weak market moves and volume: in a rising or falling market we can see weak moves — generally sharp price moves accompanied by a sharp increase in volume, which points to the possible end of the trend.
- Bullish signs: the Volume Indicator for Japanese candlesticks can help identify bullish signs. If volume rises as price falls, then price moves higher followed by a pullback that doesn’t break below the prior low, and volume falls on that second dip, this is usually read as a bullish signal.
- Volume and price reversals: after a long price move up or down, if price starts to settle into a range with little price movement and heavy volume, this can signal that a reversal is underway and prices are about to change direction.
- Volume and breakouts vs. false breakouts: on the initial breakout from a range or other chart pattern, a rise in volume points to strength in the move, while little change in volume or a volume decline on the breakout points to a lack of interest and a higher chance of a false breakout.
The Volume Indicator for Japanese candlesticks is often seen as a measure of liquidity: stocks or markets with higher volume are more liquid and considered better for short-term trading, since there are more buyers and sellers ready to trade at different prices.
What is the best timeframe for the Volume Indicator for Japanese candlesticks?
The daily timeframe is the most popular and most used by users of the Volume Indicator for Japanese candlesticks. Average daily trading volume is the daily volume of liquidity traded.
What trading signals can the Volume Indicator for Japanese candlesticks provide?
Volume patterns give a sign of the strength or conviction behind a price rise or fall for a stock, a sector, or even the whole market. Advances on rising volume are generally seen as a bullish signal, while a decline on heavy volume can be read as a bearish signal.
In short, the Volume Indicator for Japanese candlesticks is a useful tool for studying trends, and there are several ways to use it. The basic guidelines can be used to assess market strength or weakness, and to check whether volume is confirming price movement or pointing to a possible reversal ahead.
Frequently Asked Questions
What is the volume indicator?
Volume represents the total number of shares of stock or ETF units traded during the trading day. High volume points to interest in the stock or ETF, while low volume points to a lack of interest.
What does volume mean in cryptocurrencies?
In general, the trading volume of a crypto asset is the total number of units of that asset traded across all exchanges (centralized and decentralized) during a given period. However, an individual exchange will usually only show the volume traded on itself.
What is stock bid size?
This refers to the quantity of securities investors are willing to buy at a specified bid price. Bid size is quoted in board lots, each representing 100 shares. So a bid size of four represents 400 shares. Bid sizes matter because they reflect demand and liquidity for the security.
How do you read trading volume?
All trading platforms and charting tools can display volume visually throughout the trading day, usually at the bottom of the price chart. Volume is typically shown as a vertical bar representing the total volume for a given time period on an incremental chart.
Disclaimer: This article is for educational purposes only and does not constitute investment advice. Trading forex and CFDs involves leverage and carries a high level of risk to your capital; you can lose more than your initial deposit, and past indicator performance does not guarantee future results. This page may contain affiliate links, meaning we may earn a commission if you sign up through them, at no extra cost to you.
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