The Forex volume indicator strategy details a step-by-step trading strategy that allows users take advantage of the strength of a trend by making use of its volume activity.
Volume is actually needed to move price from one level to another.
Big market moves are basically a result of increased activity in the market, as well as volume.
This results in increased volatility, which is a prerequisite for huge profit sharing in the forex market.
You will be able to quickly spot whether the bulls or bears are currently in control when using this strategy.
Let’s explain the rules using the trade setups within the examples below.
MetaTrader 4 Indicators: Volume_weighted_MA.ex4 (Inputs Variable Modified; Period_MA=7), Moving Average.ex4 (Parameters Modified; Period=32, MA method=Exponential, Style=Medium Blue), LinearRegSlope_v1.ex4 (Inputs Variable Modified; Length=28)
Preferred Time Frame(s): 1-Minute, 5-Minute, 15-Minute, 30-Minute, 1-Hour, 4-Hour, 1-Day, 1-Week, 1-Month
Recommended Trading Sessions: Any
Currency Pairs: Any pair
Buy Trade Example: USD/CAD (US Dollar / Canadian Dollar), H1 Chart
Long Entry Rules
Initiate a buy entry if the following indicator or chart pattern gets put on display:
- If the medium blue 32 EMA Metatrader 4 indicator line crosses below the deep pink Volume_weighted_MA indicator line as shown on Fig. 1.0, bulls are said to be driving price higher, as such a buy alert will do.
- If the sky blue LinearRegSlope_v1 custom indicator line breaks and hovers above the 0.00 horizontal level as seen on Fig. 1.0, price is said to be pushed to the upside, thus a signal to buy the currency pair of interest.
Stop Loss for Buy Entry: Place stop loss below the previous swing low.
Exit Strategy/Take Profit for Buy Entry
Exit or take profit if the following rules or conditions takes precedence:
- If while a bullish trend is running, the medium blue 32 EMA indicator line intersects the deep pink Volume_weighted_MA indicator line, it is pointing to diminishing bulls power i.e. an exit or take profit is highly recommended.
- If the sky blue LinearRegSlope_v1 indicator line dips below the zero reference level while a bullish trend is running (see Fig. 1.0), bulls are said to be closing their positions increasingly, hence an exit or take profit will suffice.
Sell Entry Rules
Enter a sell order if the following holds true:
- If the medium blue 32 EMA forex indicator line crosses above the deep pink Volume_weighted_MA indicator line as exemplified on Fig. 1.1, bears are said to be pushing price lower, therefore it is a trigger to sell without delay.
- If the sky blue LinearRegSlope_v1 custom indicator line dips below the 0.00 horizontal level as depicted on Fig. 1.1, the overall market sentiment is said to be bearish, thus a signal to sell the currency pair of focus.
Stop Loss for Sell Entry: Place stop loss above the previous swing high.
Exit Strategy/Take Profit for Sell Entry
Exit or take profit if the following takes center stage:
- If the medium blue 32 EMA indicator line intersects the deep pink Volume_weighted_MA indicator line while a bearish trend is running, bears power is said to be halting i.e. an exit or take profit stance is highly advised.
- If the sky blue LinearRegSlope_v1 indicator line surgesabove the zero reference level during the course of a bearish trend (refer to Fig. 1.1), more and more bears are said to be leaving the market, therefore an exit or take profit stance is apt.
Sell Trade Example: USD/CAD (US Dollar / Canadian Dollar), H1 Chart
About The Forex Technical Indicators Used
The Volume_Weighted_MA custom indicator shares a lot of similarity to the simple moving average; nevertheless, the Volume Weighted MA places a lot more emphasis on the volume in a given period of time.
The general concept about the Volume_Weighted_MA indicator is that price is given more weight during heavy trading action.
The 32 EMA is an exponential moving average that has its period set at 32 and reduces the lag by adding more weight to recent price.
The LinearRegSlope_v1 custom indicator is a simple statistical method deployed in spotting the direction and strength of a leading market trend.
Technical traders use this method in technical analysis to determine if the market is in an upward or downward trend and also gauge the intensity of surge or decline, in line with the previous trend of prices.
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