The forex market is a decentralized market and as such, there is really no way a trader can tell the volume of trade carried out in the forex market on a daily basis. One may have an idea judging from a number of factors, but there is no saying the exact volume that can be traded. The importance of volume trading has been overlooked by a lot of forex traders simply because it seem like a very simple indicator that can do little or nothing to increase what a trader earns as profit or reduce the risks of trading the forex market. Even though there are other strategies a trader can use to make profits and minimize risks in the forex market, traders still need to consider volume trading every now and then as it is one way to improve trading if used correctly.
WHAT IS VOLUME TRADING?
Volume is simply a measure of how much a given financial asset has been traded in a given period of time. According to traders that have benefitted from applying it in the currency exchange market, it is a powerful tool that can do as much as improve earnings and minimize risks.
HOW DOES VOLUME TRADING HELP TRADERS IN THE FOREX MARKET
One thing traders should know about volume trading strategy is that it thrives where there is volatility – something the forex market can boast of. Volatility brings about competition among participants of the forex market, creating a platform for technical and fundamental factors to play out. With a combination of volume, fundamental, and technical analyses, you can agree that a good trade decision will be made.
With the wonderful tools of forex trading, there are a lot of thing one can do, one of which is the ability to tell what direction majority of traders are going at a particular time. As traders, we are usually inclined to go in the direction where there is a strong move. This is not to say that cases like this always result in anticipated ways, but they do in most cases.
Still on how volume trading help traders make profit and minimize risks in the forex market, is it wrong to think of volume trading as a form of sentimental analysis? They have a lot of things in common, that is if not everything. The point is, volume trading (or sentimental trading if you will) is a strategy that every forex trader should be aware of because it does help to increase profits and minimize risks.
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.