This Volume Price Action Trading Strategy Will Halve Your Losses | Swing Trade ETFS & Stocks | Summary and Q&A

TL;DR

Volume is a critical aspect of technical analysis that, when combined with price action, can help traders spot strong trends and anticipate reversal areas with better accuracy.

Key Insights

• 🔇 Volume is often overlooked by traders, but it is a critical aspect of technical analysis.
• 📈 Price action analysis can determine market phases and identify trends.
• 🔇 The on-balance-volume (OBV) indicator is an efficient tool for incorporating volume analysis into price action trading.

Transcript

Hey guys. So, I don’t know about you, but when I started trading I was completely ignoring the trading volume. I was testing all possible combinations involving different indicators and strategies, on all kind of timeframes, but I didn’t bother to include the volume in my trading decisions. And of course, my trading balance was going down every wee... Read More

Questions & Answers

Q: Why is volume important in trading decisions?

Volume provides insight into the conviction of buyers and sellers, helping traders identify strong trends and anticipate market reversals.

Q: How can price action be used to determine market phases?

Price action analysis involves identifying higher highs and higher lows for an uptrend, lower highs and lower lows for a downtrend, and no higher highs or lower lows for a sideways market.

Q: How does the on-balance-volume (OBV) indicator work?

The OBV indicator increases or decreases based on whether the price closes higher or lower compared to the previous day's close, providing a correlation between volume and price change.

Q: What patterns can be identified when combining price action and the OBV indicator?

During an uptrend, patterns include upward OBV with higher highs and higher lows, sideways OBV with higher highs and higher lows, or downward OBV with higher highs and higher lows. Similar patterns can be identified for downtrends and ranging markets.

Summary & Key Takeaways

• Volume is often overlooked in trading decisions, but it is a significant tool that shows the conviction of buyers and sellers at key levels on a chart.

• Price action can be analyzed to determine market phases: up, down, or sideways.

• The on-balance-volume (OBV) indicator is efficient for adding volume to price action analysis, as it relates volume to price change and precedes price changes.