Use of Volume Price Indicator in Improving Trades
There are two significant building blocks used for technical analysis and that is the price and volume. Mainly, there are three volume price indicators. This article will help you discuss the usage of the volume price indicator for your trading improvement. Volume, as investors all know, is the entire number of contracts and shares dealt within the precise timeframe.
It is all been said that when the volume is higher, it will have greater liquidity. Thus, higher liquidity is the lesser volatility in most conditions. Volatility is the volume of price moves. Traders and investors like to see the volume increasing slowly in the trend direction. The end indication of declining volume and trend can reflect to move with volume spike.
3 Primary Volume Indicators
Here are the three major volume indicators that can help improve your trading:
1. Volume on Balance or OBV
This volume price indicator tool is created in 1963 and until now it is one of the most famous volume price indicators. The OBV’s objective is measuring the negative and positive volume. This is displayed in graph structure to determine where the money flows. This is easily determined through the investors’ chart with the indications of the in and out flowing of contract or stocks. The increasing prices and the rising line of OBV verify the strong trend. Nevertheless, the rising price and the falling of OBV line are thought of weak indication.
2. Distribution and Accumulation Line
This is to measure the money flow of in and out of contracts and stocks. This is also used in general as the divergence indicator. Bearish signals given as the line A/D is moving down but the price is increasingly moving. Bullish indicator is line A/D upward movement by the declining price. The major issue of the line A/D does not reveal the price gaps. The closed stock gaps will never display on the A/D line inside the range.
3. Movement Ease or EOM
This indicator is responsible for the reflection of the volume amount and it is required in moving the price. EOM is graph designed with zero midpoints. It is smoothed with moving 14 day average and graphed in formatted line. EOM indicator is responsible to show the above zero of high values as the price is moving up in the light volume. Low EOM values are displayed when it is moving down. If numerous volume in moving price are taken, then indicator remains near the zero. Signals are generally given short as it crosses under zero and long if it goes on beyond zero.
Read more details about Volume Price Trend indicator and VPT indicator .
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