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Volume Indicators: How to Use Them to Analyze and Trade the Market

Volume indicators are especially important technical analysis indicators. They must be examined in conjunction with a security’s price movements.

High levels of trading volume indicate a significant price move. A consolidated breakout followed by high trading volume confirms the move. Trades with lower than average volume should be avoided.

How to use volume indicators

  1. When a consolidation breakout occurs and today’s trading volume on breakout is higher than 130% of the 30-day moving average of trading volume, then enter the trade
  2. If trading volume is below 130% of the 30-day moving average avoid the trade

You can enter a breakout with high trading volume the next trading day.

Extreme values of trading volume

If trading volume is more than 200% of the 30-day moving average it could mean a trend exhaustion and a possible price reversal.

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