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    Indicator Volume

    First we begin with some theoretical stuff: there are two kinds of Volume we can put on our charts - Real or Tick Volume.
    Real volume shows the actuall currency/stock/metal exchanged for the period of a particular bar, Tick Volume shows the number of price changes for the period, which is approximately the number of trades made. Some platforms take in account two consecutive ticks at the same price as one and that is where the 'aproximate' part comes from. In Forex of CFD markets real volume is not available, at least for us poor retail traders. Real and Tick volume are not the same, but there is a connection between them - the more trades made the more volume exchanged. In most cases that is more than enough for technical analysis.

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    Here is one more example of the 1 minute tick volume end-warning. Later we see one more huge bar whose volume is not so extreme - it doesn't end the move.
    One way to exit on such warning is to close at the close of the warning bar, another - if we don't have confirmation by other techniques - is to move our stop tightly - somewhere in the begining of the warning bar. this way if it is not an end our position will see the better prices.

    http://i.imgur.com/C3keViS.png

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    This is how the same chart looks like on an interpolatet data stream:

    http://i.imgur.com/5hlmKJL.png

    There is one more difference here as this is the Oil market - the previous chart is a CFD based on one contract and the latter is a CFD based on continuous Oil market. There are a few days in the month when the rollover of the contract is made for the continuous data where prices might differ.

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    If we follow the interpolated data stream with both shorts and longs there is a big probability not only to miss the end of the bear move, but to take a hint for closing at half the up-movement.
    Later we see that lots of bars have that 'big' volume and if we compare the actual values to previous sessions we will have to dismiss all the hints - both definite and not-so-much. On the other data stream there is one definite and one not-so-much - they both mean something.

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    Comparison between Tick Volume from different days and sessions might be best done with Moving Averages. In the MetaTraders there would be needed custom indicators to do that, though it should be about two to four lines of code to write yourself one (four lines including a histogram for the volume and a line for the MA). It should be available from many sources already written also. There are other platforms like NinjaTrader or TradeInterceptor where it can be done with the built-in indicators.

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    Contrary to what is written is some books that breakout happen when there is 'much buying' volume on breakouts should not be very much. A long bull bar without shadows for example in price action is often described as strong buying, where what actually matters for that bar to look like this is there is little selling. If volume is big that would mean more selling and bigger chance for the breakout to fail. Volume that confirms a breakout should be about average and below.
    There are the news-like breakouts also, where there is sudden rise in trading as a whole - big volume is normal for them, but those are generally not so good for us as there is little probability to be known in advance solely by technical analysis.

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    When analyzing a 24-hour market with Volume - be it Tick or Real - it is important to note the sessions, as Volume is notably different. This is most clearly seen on 1 to 4 hour charts. Lucky for us it is mostly Tick Volume which is available for those markets and Tick Volume has less and less value the bigger the timeframe becomes.

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    The mathematical relation between Tick and Real volume is generally exponential - if there is little Tick volume that means a few contracts traded per tick, if there is huge tick volume that means a lot more contracts traded per tick.
    If we include both Real and Tick volume and some situation is different than this - say there is one tick with huge volume - the Russian Ruble on 16 Dec last year is great example for that - it is one more alert for us (for USDRUB it was one tick that not even all platforms registered with huge orders that got only partial fill but it was still huge, that high was the extreme for the big decline of the Ruble from last year).

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    Real volume on currency markets is generally not available. There is mostly the Futures markets available (CFTC's COT reports included). Most big speculative trades are made on the FX markets and that usually means the key moments in which we are interested. From time to time there comes up some nice trade being done and the volumes included. The mentioned Russian Ruble trade is not even noted on some quote streams.

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    Real volume is more possible for use on energy futures. We still need to analyze all markets involved though - for example if we analyze the Oil markets we should include analyzing Real volumes on WTI, Brent, Russian etc. etc. markets, not just one.
    Real volume is a great tool when analysing stock shares also, probably for index futures too.

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    The CFTC's COT report is one of the greatest tools for fundamental analysis of the markets included there, mostly because it includes grouping of the participants - both long-term speculators and actual producers that use the futures markets to insure the risks on their business. Mostly cited are the 'legacy reports', but the 'traders in financial futures' is actually quite more informative.

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