The trade volume index (TVI) is a technical indicator that can measure the amount of money flowing in and out of an asset. Generally, the function of a technical indicator is to predict the future price levels and general price direction by referencing the past pattern of the security. This is to enable one not to miss an opportunity, and also to save the time and efforts it would have taken to do that manually. A unique thing about the TVI that is uncommon with many other technical indicators is that its data is generated using intraday price data (that is the price data generated based on the happening in the market within the day). The underlying assumption of the trade volume index is as follows
- There is buying pressure when the price trades near the asking price
- There is a selling pressure when the price trades near the bidding price
Every forex trader and analyst is out for anything that can indicate whether as specified asset is being accumulated or distributed over a period of time. From the knowledge of this, it is easy to predict the future levels and general price directions of a trade. The forex trade volume index is specifically designed to do such with tick data of a security generated within the day; that is why it is so important to investors and analysts both in the foreign exchange market and beyond.
TIMING ENTRIES AND GUAGING THE MOMENTUM OF A SECURITY IN THE FOREX MARKET
With the forex trade volume index, it is easy to time entries and gauge the momentum of a commodity. From its display, one can tell when others are accumulating currency pairs, and if the data display of the TVI shows steady increase, investors start to look to sell the pair, and analysts can initiate buy ratings. On the other hand, the TVI can also tell when currency pairs are being distributed with a steady decrease for a while, and one will naturally expect to buy the pair. Seeing as so much about currency trading depends on timing, and how the trade volume index is good in timing entries and gauging momentum, it will go a long way to help in achieving success in trades.
The forex trade volume index is indeed important to traders and analysts alike, and should be considered by others that are yet to apply it to their trades.
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