Technical Analysis

Healthy Trends

Volume’s Significance:

Technical traders are always looking for good trends to trade. A position or swing trader uses the volume indicator to try and locate healthy trends that they can “ride” for a month or so. We will look at some past examples so that a beginner trader can get a feel for how to use the interpretations of this very important indicator.

• An upwards movement is a strong trend if volume is increasing as price heads up, and sessions where price decreases are associated with lower volume.
• A healthy downtrend would see volume increasing as price decreased and volume decreasing on sessions where the price increases.

There are three healthy trends that can be analyzed from February through May. Two of two of them are uptrends and one is a downtrend. Even thought they are not very long lasting, their progression will be covered more in depth coming up. In a general sense one can see that in mid February price increased as volume trended upwards. In March, the initial down move came on increasing volume. Lastly, after the downtrend reverses, the middle of the following uptrend comes on increasing volume.

The first two healthy trends will be explored in figure 4; the third healthy trend will be covered in figure 5. It should be evident that identifying trends, during trending market situations such as the one in figure 3, can be very useful to a trader. You can see for yourself the amount of pips that each trend moves.

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