Volume Trading Strategy for Trend Trades: This video (and article) will teach the basic meta-patterns of Volume and price, and how volume and price intersect and interact with each other. Incorporate this in your trading to boost your trading performance.

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Volume Trading Strategy for Trend Trades

Welcome my friend to this volume trading strategy video. I am going to share with you one of the basic meta-patterns of volume and price – price-volume trading strategy, how volume and price intersect and interact with each other. So here are the basic patterns, very simple. And what we’re going to do, first of all, is identify the general level of volume, that’s kind of an average level of volume here on this market. Let’s see, we can put it in right about here I guess – we’re just trying to capture, you know, where the normal volume goes the vast majority of the time and then catch some of these breakouts that are exceptions. And you could also do this with a moving average.

By the way, a lot of people like to put a moving average on their volume histogram and that’s okay. The only reason that I actually prefer to do it this way is that I think it is a little more accurate in the sense that you can give it a little wiggle room and you can eyeball it to capture that. The moving average is convenient because it automatically plots for you, but it’s also incorporating and it’s lagging actually. Either way, it is fine if you have a preference, no problem. Anyway, here is the basic pattern. So as price moves up, as we get an impulse move up, we want to ask ourselves, is that a strong move up or a weak move up? And then we want to also ask ourselves on the retrace, is that a strong move down or a weak move down?

Trading volume analysis

If we’re going to go along, what we want is a strong move up and a weak move down. We don’t want there to be a lot of buying coming in followed by a lot of selling right away. That’s what creates the patterns – V-tops, V-bottoms. So, in other words, we want the buying power to stay strong. What we get then on the price histogram here is, sure enough, as price is going up, it breaks out of this volume range and then as we get our retrace, it goes back into the volume range and stays down there. That is how we measure, specifically, the “how to” in determining whether there is strength up and if the retrace is on selling strength or on selling weakness. If it’s on selling weakness, then there’s not a lot of short selling from institutions and big players.

There might be some retail shorting. That’s fine. That’s not going to affect the market turning around and going down very much and that might just be a lot of profit taking, and that’s fine too. So, that’s the kind of pattern we want to see if we want to buy a retrace in a trend and then we say, okay, still interested in staying on the long side of this. So as the market moves up, puts in another impulse, move up, what happens? We get above that range, and then an impulse move up on volume, now we’ve got a strong move up. So everything’s still good, but that’s not enough. Now, if we’re going to add to our position or maybe we didn’t get in on the first retrace or we only identified this later, then we’re going to ask ourselves the exact same question.

Best volume indicator for day trading

Now look, the price goes down quite a bit, right? So if you’re just looking at price, that’s a pretty steep retrace. The retracement there, percentage-wise, is a lot. But then we go look at volume and there wasn’t a lot of selling volume. So selling volume went back into kind of just the average range, which means pretty much nothing. That’s just kind of the status quo, not strong up, not strong down, just kinda hanging around. Therefore, that’s why it’s important to not only look at the price pattern but also with the volume pattern to see how strong or weak that selling is because the selling could look dramatic.

Next move goes up, and what happens to volume? Goes up on strength now. That’s the strongest volume that we get, right? It goes above these two highs on volume and makes the highest high, but it’s also at a place that we’re now kind of in an extended trend. And you know, the slogan, probably the trend is your friend until the end. What that really means is that we should only trade trends early in a new trend. So the trend is your friend until the end. It’s really a timing slogan; it means the longer the trend continues, the less likely it is to continue, and it can be challenging to know when that trend will end.

Volume breakout strategy

So we get a one, two, three, four, five, pattern. All right. I’m not talking about Elliot ways. I’m just talking about these impulse moves in retraces. So, in my training methodology, I prefer it only trade the first retraces and trend and that again is just to follow that rule. Now, it could go further than this, but the odds get diminished and I want to trade with the odds. I don’t want to trade outside of the odd. I’d rather take my money and look elsewhere for a high probability trade meaning early in a new trend. Now, the problem, too, is late in an old trend, you can also get a big impulse move on volume and it can be an exhaustion pattern.

Again, that is more likely to happen late in an old trend than it is early in a new trend. It can also be a trend ending signal, especially after we’ve been going out for a while now. This one actually turned out kind of nice and neat and didn’t cause any problems because, at this point, the market puts in the low and high, and just kind of go sideways for a while. And, again, that’s indicated with volume. So, this whole time, the volume stays down in that range. In other words, there’s none of these impulse moves where the market goes up, none of them are accompanied by big volume. None of them break out of this volume range.

Intraday volume analysis

And that’s what would tell me that probably these are not going to be big moves and they’re not. And so this is a great meta-pattern and this is really the first volume pattern that I think everybody should learn. There are always some exceptions to the rules and it can get into that later, but you got to start with the rules and then you’ll learn the exceptions. So, this is something everybody should understand, know and memorize. It’s pretty simple.

It’s pretty logical and I think it’s within everyone’s grasp to get this – works on day trading, swing trading, stocks, commodities, and options. I would say it works somewhat on FOREX, although you have to be careful with FOREX because it uses tick volume and it’s also not a centralized exchange. Day trading, I would say, again, it does work, but day trading, it doesn’t work quite as well as with daily bars because the trading has a meta-pattern of volume built into it that you have to overcome and, trade outside of the meta-pattern.

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I’ve got another video on youtube if you’re interested in that, but, this kind of basic pattern can still be seen in day trading. Still, be seen in forex trading, but ultimately I’m trading this on daily charts with stocks and futures, commodities, things like that works fantastic. Alright, well, if you thought the video was good, if it was helpful for you, then share good things with good people. Go ahead and click the share button below.

Also, share your comments. I’d love your comments if you have any questions or even request for videos in the future for topics. Put your comments down below. Your comments, I love them. I read every single one of them, by the way, and it keeps me motivated to continue to create more free tutorials for you. Finally, I have a trading strategy I’d love to share with you. And this one is a complete trade strategy. I mean including the entries, the exits, where to place your stops, everything and did I can’t do it in a 10-minute youtube video. So I created a little mini-course for you. That course is absolutely free. This is called my rubber band trade. Feel free to click on the link in the top right corner of this youtube video and you can get access to it there.

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BTW, if you’re interested in the indicator that I use personally for very precise entries and exits, I’m happy to share that with you. Just send me an email at [email protected], and I’ll show you how to get access to that indicator.

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