Positive Volume - A Powerful Indicator for Trading
What is Positive Volume?
Positive Volume is an indicator that measures the volume of an asset traded during a period where the price has increased from the previous period.
In simple terms, it means that more traders are buying the asset than selling it, indicating a bullish sentiment in the market.
The Positive Volume indicator can be plotted as a histogram below the price chart, which helps traders identify trends and potential trades. The histogram plots the difference between the positive volume and the negative volume.
How does Positive Volume Work?
As mentioned earlier, Positive Volume measures the volume of an asset traded during a period where the price has increased from the previous period.
The Positive Volume indicator is calculated by taking the volume of each bar and assigning a value of +1 if the price closes above the previous bar's close and a value of -1 if the price closes below the previous bar's close.
These values are then added up over a defined period, and the resulting value is plotted on the histogram below the price chart.
If the histogram is predominantly green, it indicates a bullish trend, and if it is predominantly red, it indicates a bearish trend. Traders can use this information to make trade decisions based on market trends.
How to Interpret Positive Volume Signals
Positive Volume signals can be interpreted in several ways, depending on the trading strategy employed by the trader.
Some traders use the Positive Volume indicator as a confirmation tool for other indicators, such as moving averages and trend lines.
Others use it to identify potential buy and sell signals. For example, if the Positive Volume indicator is predominantly green and the price is trending upwards, it could be a good time to buy the asset.
On the other hand, if the Positive Volume indicator is predominantly red and the price is trending downwards, it could be a good time to sell the asset or short it.
It is important to note that no trading indicator is fool-proof, and traders should always use other technical and fundamental analysis tools to confirm their trade decisions.
Benefits of Using Positive Volume
Positive Volume can provide traders with valuable information about market trends and potential trades.
It is a simple yet powerful tool that can help traders identify buy and sell signals and fine-tune their trading strategies.
Using Positive Volume in combination with other technical and fundamental analysis tools can increase the chances of making profitable trades and reduce the risk of losses.
In addition, Positive Volume is easy to use and can be applied to any asset traded on any time frame, making it a versatile and useful trading indicator.
Conclusion
Positive Volume is a powerful trading indicator that measures the volume of an asset traded during a period where the price has increased from the previous period.
Traders can use the Positive Volume indicator to identify potential buy and sell signals and fine-tune their trading strategies.
While no trading indicator is fool-proof, Positive Volume can provide valuable insights into market trends and potential trades.
By using Positive Volume in combination with other technical and fundamental analysis tools, traders can increase their chances of making profitable trades and reduce the risk of losses.