Point volumes in Forex trading refer to a technique of analysis where trading volumes at specific points or levels on a price chart are studied. These volumes help traders understand at which price levels the most significant changes in supply and demand occur, which can indicate potential reversals or trend continuations.
Main Points to Consider When Working with Point Volumes:
Volume as an Indicator of Trend Strength: When the price moves in a specific direction (e.g., up or down) with high volume, this may indicate a strong trend. Conversely, if the price moves with low volume, the trend may be weak and unstable.
Confirmation of Support and Resistance Levels: If the trading volume at a particular level sharply increases, it may indicate that this level is of interest to major market players, potentially marking a support or resistance level.
Using Volume to Identify Reversals: When volume sharply increases at the top or bottom of a trend, it may signal a potential market reversal. For example, if the volume suddenly rises at the peak of a trend, this could suggest that the trend is nearing its end.
Volume within Specific Time Periods: Point volumes can be measured for specific time intervals—such as hourly or daily candlesticks. This helps traders track where the most significant changes occur on the chart.
Comparing Volume with Historical Data: To analyze the current volume, traders often compare it with historical volumes at similar levels. This helps identify anomalies and assess how unusual the current activity is.
Using point volumes can be helpful for more accurately determining potential entry and exit points, as well as for gaining a better understanding of market sentiment and the activity of large market participants.
