Looking for the best volume trading strategy? Your hunt for the Holy Grail is over. With a 77% win rate, this might be one of the best forex trading strategies you’ll ever find on the internet… and it’s completely FREE.
With over 30 years of combined trading experience, our team at Trading Strategy Guides has put together this step-by-step trading guide so you can profit from analyzing the strength of a trend based on volume activity.
The Forex market, like any other market, needs volume to move from one price level to another.
The Forex market is the largest and most liquid market in the world, with transactions worth 6 trillion dollars being made daily. If you can master volume analysis, many new trading opportunities can arise.
If we have a lot of activity and volume in the market, then it causes volatility and big movements in the market. This is really what most traders need to make a profit in the Forex market or in any other market, be it stocks, bonds or even cryptocurrencies.
While you can still make money even in small markets, most trading strategies need that extra volume and volatility to work.
Volume Indicator Forex
In the Forex market we do not have a centralized total volume exchange because we trade over the counter. If we look at any trading platform like TradingView, they have a volume to the chart. Since we don’t have a centralized exchange, the volume comes from the feed that TradingView uses. Each retail Forex broker has their own total trading volume.
We can see that the volume in the Forex market is segmented, which is why we need to use our best volume indicator.
The volume indicator Forex used to read a volume in the Forex market is the Chaikin Money Flow indicator (CMF).
The Chaikin Money Flow Indicator was developed by trading guru Marc Chaikin, who has been coached by the most successful institutional investors in the world.
The reason why Chaikin Money Flow is the best volume and the classic volume indicator is that it measures institutional accumulation distribution.
On a rally, the Chaikin volume indicator should be above the zero line. On the other hand, Chaikin’s volume indicator should be below sell price below the zero line.
Volumes trading strategy
This volume trading strategy uses two very powerful techniques that you won’t see written anywhere else. These are trading secrets that we have taught only to professional traders.
The Chaikin indicator will dramatically improve your timing and teach you how to trade definitively. Having a good defense when trading is absolutely essential to keep the profits you have earned.
Before going further, we always recommend taking a piece of paper and a pen and taking note of the rules of this entry method. You can also read a million forex strategy
In this article we will look at the buy side.
The importance of buying volume and selling volume
Volume trading requires careful attention to the forces of supply and demand.
Stock traders will look for instances of increased buy or sell orders. They also note the current price trends and possible price movements.
In general, increased trading volume will tend heavily towards buy orders. These positive volume trends will prompt traders to open a new position.
On the other hand, if the cash flow and trading volumes are falling – we see a “strong divergence”, which means that it will probably be an appropriate time to sell.
You should also note the relative volume — regardless of the raw number of transactions that occur in the trading period. Ask yourself how the potential asset is progressing relatively to what was expected?
By learning how to use the Chaikin Money Flow and other relevant indicators, you will be able to easily identify whether the buyer or the seller is currently “in control.”
With practice, volume trading strategies can deliver profits for your portfolio 77% of the time!
Step 1: Chaikin Volume Indicator should shoot in a straight line from below zero (minimum -0.15) to above the zero line (minimum +0.15).
If the volume transitions from negative to positive in a strong way, it may indicate strong institutional buying power. This is our basic heavy lifting signal!
Basically, we let the market reveal its intentions.
When big money enters the market, they leave a mark because their orders are so large that it is impossible to hide. If the volume indicator Forex goes right from below zero to above the zero line and beyond, it shows accumulation by smart money.
We believe that you get the best bang for your buck when you trade side by side with smart money. Chances are that institutions have more money and more resources at their disposal. Rules can be stacked against you, so if you want to change them, follow the smart money.
There is one more condition that must be met to confirm a trade entry.
See below:
Step #2: Wait until the Forex volume indicator slowly pulls back below the zero line. The price must stay above the previous low.
After seeing the elephant in the room, including the institutional players, we start looking at the first sign of the weakness in the market. You can identify the right swing to increase your profit.
We are going to let the Chaikin Money Flow indicator slowly drop below the zero line. The key word here is “slow”. We don’t want to see the volume drop quickly because that would invalidate the build-up that was previously noted.
Second, as the volume drops and drops below zero, we want to make sure that the price is glowing above the previous swing. This will confirm the accumulation of smart money.
The Volume Strategy meets all the required trading conditions, which means we can move forward and outline what is the attractive condition for our entry strategy.
See below:
Step 3: Buy as soon as the Chaikin Forex indicator breaks back above the zero line. Wait for the candle to close before pulling the trigger.
Now that we’ve seen real institutional money come into the market, we’re waiting for them to step back in and push the market up again.
If the Chaikin indicator breaks above zero, it indicates an impending rally as the smart money tries to mark the price again.
We will have to wait for the candle close to confirm the Chaikin break above the zero line. Once everything lines up, we can open our long position. Here is an example of a main candlestick setup.
* Note: the candle for the trigger must have the closing price in the upper 25%.
This brings us to the next important step. We need to set up the Chaikin trading strategy that finds where to place our protective stop loss.
See below:
Step 4: Hide your protective stop loss under the previous pullback
Using a stop loss is crucial if you want to have an idea of how much you are going to lose at the point. Never underestimate the power of placing a stop loss because it can save.
Simply hide your protective stop loss under the low downside. Never use a stop loss, and always commit a SL at the moment you open your trades.
Trading with a tight stop loss can give you the opportunity to not only get a better risk to reward ratio, but also to trade a larger lot size.
Finally, we should also learn how to maximize your profits with the Chaikin trading strategy.
See below:
Step #5: Take profit when the Chaikin volume drops below -0.15
Once the Chaikin volume drops below -0.15 again, it indicates that the sellers are stepping in and we want to take profits. We don’t want to risk giving back part of the profits, so we liquidate our position at the first sign of the smart money walking in on the other side of the market.
We can always get back into the market later when the smart money buyers show up again.
** Note: The above was an example of a BUY trade with the best volume indicator. Use the same rules for a SELL trade – but in reverse. In the figure below you can see a real example of SALE.
Conclusion – Best volume indicator
The volume trading strategy will continue to work in the future because it is based on how the markets move up and down. Any market moves from a rally (spread) or base to a rate, and so on. This is how the markets have been moving for over 100 years.
Smart money always tries to hide their trading activities, but their footprints are still visible. We can read those marks using the right tools. Here is another strategy on how to apply technical analysis step by step.
Be sure to follow this step-by-step guide to read the Forex volume properly. The Chaikin indicator adds additional value to your trading because you now have a window into the volume activity the same way you do when trading stocks.
Thanks for reading!