Volumes Indicator For MT5

Volumes Indicator For MT5

 

Table Of Contents:

  1. Volumes Indicator For MT5
    1. Volumes Indicator Introduction
      1. What is tick volume?
      2. Tick volume varies
      3. Indicators for tick volume
    2. How to Interpret the Volume Indicator
      1. Trend strength
      2. Trend reversal
      3. Market breakout
    3. Volumes Indicator Input Parameters
    4. Built-in MT5 Volume Information
    5. Built-in MT5 Volumes Indicator
    6. Trading System Using Volumes Indicator
      1. Find the trend
      2. Find entry signals
      3. Confirm the signal
      4. Enter and manage the trade

 

Volumes Indicator Introduction

The Volumes Indicator for MT5 is a technical analysis tool that can help traders gauge the strength of a trend in any symbol and period.

What is tick volume?

Tick volume refers to the number of price changes over a specific period of time. While it does not directly specify the amount of all transactions occurring in each period, tick volume correlates with the actual numerical value. With this information, it is possible to determine how actively a certain market is traded at various times.

MT5 provides the tick volume because it is not possible to determine the real volume. For traders, the value of tick volume is that this information is not derived from price. Therefore, adding tick volume to your trading system as an entry requirement holds more weight than adding another indicator that is a price derivative such as a moving average or an oscillator.

 

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Tick volume varies

Keep in mind that the tick volume you see on your chart is equal to the number of price changes over a certain period and this information is obtained from the liquidity providers of your broker. Therefore, each broker can have slightly different values of tick volume for a specific asset and timeframe.

A strong trend reflects the interest of market players. However, many traders ignore volume in their trading when in fact it provides critical information about the trend. To get this information, the MT5 platform has built-in volume indicators.

 

Indicators for tick volume

When you trade the stock market, getting information about the real volume of trading is easy because the stock exchange provides it to you. This information lets you figure out if a trend is backed by market players or not. In the foreign exchange market, the situation is not the same. Regardless, it is still possible to get insights from tick volume.

Forex is decentralized, so it is not possible to count the number of all orders and the total lot sizes. Therefore, currency traders often resort to using tick volume indicators. Besides, counting the total number of ticks coming in on each bar is just not possible to do. Good thing, free tools are available online, so you do not have to calculate anything manually, and MT5 itself provides an in-house solution.

How to Interpret the Volume Indicator

As a technical analysis tool, the volume indicator can play multiple roles:

  1. Measure the trend strength
  2. Spot trend reversals
  3. Confirm breakouts

 

Trend strength

You can say that a trend is strong if it is accompanied by increasing volume because it suggests that market participants are interested in this trend. Therefore, in an uptrend, you should see a rise in volume as price is moving upward and a drop in volume as price makes a retracement or consolidates. In a downtrend, you should see a rise in volume as price is moving down and a drop in volume as price makes a correction or consolidates.

 

Trend reversal

Identifying a price reversal and a correction is always a difficult task, but the volume indicator can help ease the burden for traders. You can use this tool to detect a trend reversal early and jump on it as quickly as possible. If you see a decrease in volume while price is moving in a trend, this signifies a trend that is losing steam. You can then assume that a trend reversal is under way and position your trades accordingly.

 

Market breakout

Tick volumes are normally low during consolidation. If you see that a breakout of support or resistance is accompanied by a rise in volume, you might be seeing a real breakout instead of a false breakout.

 

Volumes Indicator For MT5

 

Volumes Indicator Input Parameters

As you can see in the above image, this indicator contains only one parameter in inputs (i.e., Volumes), and its default value is Tick volume, but the user can choose another option, that is, Real volume. When the indicator is applied on a foreign exchange symbol, though, the Real volume option will show an empty window.

 

Volumes Indicator For MT5

 

Built-in MT5 Volume Information

If you have been using MT5 for a while, it might come as no surprise to you that MT5 can give you the volume information without attaching any indicator on the chart. This is shown as a histogram with all green bars below the candles on the main chart but above the custom volume indicator sub-window.

You can show this information by going to Properties or pressing the F8 key on your keyboard, selecting the Show tab, and checking the “Show tick volumes” box. Refer to the image above. What you will get is raw volume without indication about relative changes in value.

 

Volumes Indicator For MT5

 

Built-in MT5 Volumes Indicator

If you want a volumes indicator that will let you see the historical changes in values, you can have one without leaving the MT5 platform because that indicator sits right on the MT5 interface. As shown in the image above, you can display this indicator on the chart by clicking on the Indicators menu, going to Volumes sub-menu, and clicking on the Volumes command. With this knowledge, you do not have to look for a volumes indicator somewhere online and import one to MT5.

 

Volumes Indicator For MT5

 

Trading System Using Volumes Indicator

A trading system will be outlined below that will help you learn how to use the volumes indicator in your manual trading campaign. As with any trading system, sticking to the rules is key to success, so does following the process to the letter. The following tools are used in this trading system:

  • 200 exponential moving average
  • 20 exponential moving average
  • Volume indicator

The trading process involves the following steps:

  1. Find the trend with the 200 EMA.
  2. Find entry signals in line with the trend using the 20 EMA.
  3. Confirm the signal with the volume indicator.
  4. Enter and manage the trade.

 

Find the trend

The first step in this trading system is to identify the long-term trend of the current chart. This is done using the 200 EMA. If price is below 200 EMA, the trend is down, but if price is above 200 EMA, the trend is up. In the above example, the trend is down since price is below the 200 EMA in aqua.

 

Find entry signals

Your trade entry should be in line with the trend. This happens after the corrective phase when the market is ready to continue the trend. The actual trigger for entry is a candle break of (and a close below) the 20 EMA as shown by the white-filled candles in the above chart. This happened seven times as marked by the down arrows.

 

Confirm the signal

In this trading system, a candle break is not enough to enter the trade. You must check the volume indicator if the candle break is accompanied by an increase in volume and if the threshold volume is reached. A volume increase is easy to figure out. Just check if the color of the volume bar is green. If red, that is a volume decrease instead. Apart from the green color, the bar must have a minimal value of 8,000 ticks for the volume to be valid. With this last requirement, the three signals in red arrow are not qualified.

 

Enter and manage the trade

When all the entry criteria are met, it is time to enter the trade. In this example, you would be able to take four sell entries at points marked by the pink arrows. In this market condition, the best location for the stop loss is the recent swing high plus the spread. Meanwhile, the take profit can be a fixed value as a multiple of the trade risk or a trailing stop.

 

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