Volume trading strategy

Looking for the best volume trading strategy? Your hunt for the Holy Grail is over. With a win-rate of 77%, this can be one of the best Forex trading strategy that you’ll ever find on the internet... and it's totally FREE.

With more than 30 years of trading experience combined, our team at Trading Strategy Guides has put together this step-by-step trading guide so you can take advantage of 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 the most liquid market in the world, with 6 trillion dollars worth of transactions performed on a daily basis. If you can master volume analysis, a lot of new trading opportunities can emerge.

When we have a lot of activity and volume in the market, as a consequence, it produces volatility and big moves in the market. That’s really what most traders need in order to make a profit trading the Forex market or any other market be it stocks, bonds or even cryptocurrencies.

While you can still make money even in tight range markets, most trading strategies need that extra volume and volatility to work.

Volume Indicator Forex

In the Forex market, we don’t have a centralized exchange of total volume because we’re trading over the counter. If we look at any trading platform like TradingView, they have a volume attached to their chart. But, since we don’t have a centralized exchange that volume is coming from the feed that TradingView uses. Each retail Forex broker will have their own aggregate trading volume.

We can see that the volume in the Forex market is segmented, which is the reason 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).

Volume trading strategy

The Chaikin Money Flow indicator was developed by trading guru Marc Chaikin, who was coached by the most successful institutional investors in the world.

The reason Chaikin Money Flow is the best volume and classical volume indicator is that it measures institutional accumulation-distribution.

Typically on a rally, the Chaikin volume indicator should be above the zero line. Conversely, on sell-offs, the Chaikin volume indicator should be below the zero line.

Volume Trading Strategy

This volume trading strategy uses two very powerful techniques that you won’t see written anywhere else. These are trade secrets that we’ve only been taught to professional traders.

The Chaikin indicator will dramatically improve your timing and teach you how to trade defensively. Having a good defense when trading is absolutely critical to keep the profits that you’ve earned.

Before we go any further, we always recommend taking a piece of paper and a pen and take notes of the rules of this entry method. You can also read a million USD forex strategy

In this article, we’re going to look at the buy side.

The Importance of Buying Volume and Selling Volume

Volume trading requires you to pay careful attention to the forces of supply in demand.

Volume traders will look for instances of increased buying or selling orders. They also pay attention to current price trends and potential price movements.

Generally, increased trading volume will lean 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 decrease-- we see a “bearish divergence”, meaning that it will likely be an appropriate time to sell.

You also need to pay attention to the relative volume—regardless of the raw number of transactions occurring in a trading period. Ask yourself how is the prospective asset performing relative to what was expected?

By learning how to use the Chaikin money flow and other relevant indicators, you will easily be able to identify whether the buyer or the seller is currently “in control.”

With practice, volume trading strategies can yield wins for your portfolio 77% of the time!

Step #1: Chaikin Volume Indicator must shoot up in a straight line from below zero (minimum -0.15) to above the zero line (minimum +0.15)

When the Volume goes from negative to positive in a strong fashion way it has the potential to signal strong institutional buying power. That’s our base heavy lifting signal!

Basically, we let the market to reveal its intentions.

When big money steps into the market, they leave a mark as their orders are so big that it’s impossible to hide. When the volume indicator Forex goes straight from below zero to above the zero line and beyond, it shows accumulation by smart money.

volume indicator forex

We’re a firm believer that you get the maximum 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. Odds can be stacked against you, so if you want to change that, just follow the smart money.

There is one more condition that needs to be satisfied to confirm a trade entry.

See below:

Step #2: Wait for the Volume Indicator Forex to slowly pullback below the zero line. The price needs to remain above the previous swing low.  

Once we spotted the elephant in the room, aka the institutional players, we start to look for the first sign of market weakness. Here is how to identify the right swing to boost your profit.

We’re going to let the Chaikin Money Flow indicator slowly drop below the zero line. The keyword here is “slowly”. We don’t want to see the volume dropping fast because this will invalidate the accumulation noted previously.

best volume indicator

Second, as the volume decreases and drops below the zero, we want to make sure the price remains above the previous swing glow. This will confirm the smart money accumulation.

The Volume strategy satisfies all the required trading conditions, which means that we can move forward and outline what is the trigger condition for our entry strategy.

See below:

Step #3: Buy once the Chaikin Forex indicator breaks back above the zero line. Wait for the candle to close before pulling the trigger. 

Now that we have observed real institutional money coming into the market, we wait for them to step back in and drive the market back up.

When the Chaikin indicator breaks back above zero, it signals an imminent rally as the smart money is trying to markup the price again.

We would need to wait for the candle close to confirm the Chaikin break above the zero line. Once everything aligns, we’re free to open our long position. Here is an example of a master candle setup.

volume trading strategy pdf

*Note: The trigger candle needs to have the closing price in the upper 25%.

This brings us to the next important step. We need to establish the Chaikin trading strategy which is finding where to place our protective stop loss.

See below:

Step #4: Hide your protective Stop Loss under the previous pullback’s low

Using a stop loss is crucial if you want to have an idea of how much you’re about to lose on your trade. Never underestimate the power of placing a stop loss as it can be lifesaving.

Simply hide your protective stop loss under the previous pullback’s low. Never use a mental stop loss, and always commit an SL right at the moment you open your trades.

Trading with a tight stop loss can give you the opportunity to not just have a better risk to reward ratio, but also to trade a bigger lot size.

stock volume analysis

Last but not least, we also need to 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 back below -0.15, it indicates that the sellers are stepping in and we want to take profits. We don’t want to risk giving back some of the profits gained so we liquidate our position at the first sign of the smart money stepping in on the other side of the market.

We always can get back into the market later if the smart money buyers show up again.

Volume trading strategy

**Note: The above was an example of a BUY trade using the best volume indicator. Use the same rules for a SELL trade – but in reverse. In the figure below, you can see an actual SELL trade example.

volume indicator forex

Conclusion – Best Volume Indicator

The Volume Trading Strategy will continue to work in the future because it’s based on how the markets move up and down. Any market moves from an accumulation (distribution) or base to a breakout and so forth. This is how the markets have been moving for over 100 years.

Smart money always seeks to mask their trading activities, but their footprints are still visible. We can read those marks by using the proper tools. Here is another strategy on how to apply technical analysis step by step.

Make sure you follow this step-by-step guide to properly read the Forex volume. The Chaikin indicator will add additional value to your trading because you now have a window into the volume activity the same way you have when you trade stocks.

Thank you for reading!

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With over 50+ years of combined trading experience, Trading Strategy Guides offers trading guides and resources to educate traders in all walks of life and motivations. We specialize in teaching traders of all skill levels how to trade stocks, options, forex, cryptocurrencies, commodities, and more. We provide content for over 100,000+ active followers and over 2,500+ members. Our mission is to address the lack of good information for market traders and to simplify trading education by giving readers a detailed plan with step-by-step rules to follow.