Volume is one of the most popular indicators for traders and - as we have already mentioned - can prove to be very useful, especially in the individual value area.
As the volume is not calculated from the price itself, it can therefore also be considered as additional information. This fact is very important to many traders.
Volume And Binary Options
In order to understand the indicator, we first explain how the OBV indicator works. Simply explained on-balance volume The on-balance volume indicator is calculated quite simply. The retail sales for the current day are negative if the price has fallen compared to the previous day, i.
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It is positive if the price has increased compared to the previous day, i. This enables a statement to be made as to whether money has flowed from the share or into the share. The whole thing is accumulated over the course of time, which results in a rising or falling OBV indicator.
Importance of Volume for Trading Binary Options
The greatest weakness of the indicator is its delayed responsiveness. Strong volume peaks mean that the indicator needs a longer adjustment time, so that the informative value is limited during this time. The lower weekly chart of the DAX futures shows this fact.
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The indicator was unable to show the larger correction, but fluctuated slightly. However, he confirmed the continuation of the upward trend very well.
The money flow index simply explained The money flow index is a further development of the OBV indicator. When calculating the indicator, it is not only the closing prices of price bars that are compared, but the difference between the average prices. It shows not only the cash flow, but also the momentum of the cash flow.
An extremely important metric, it is often overlooked by novice traders. Read this article to understand the concept of volume better and learn how to use it in trading.
The momentum is, so to speak, the momentum of a movement or the expression of the momentum. This allows conclusions to be drawn about the strength of a trend and the underlying cash flows.
Based on our findings, we define a few rules: To buy a call option, the MFI indicator must be above To put a put option buy, the indicator must be below a value of Trend breaks within the indicator are traded.
Puts will only be bought if the downward trend is strong price The exit possibly if the option is sold prematurely takes place as soon as a divergence between the price and MFI indicator is displayed.
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It can be seen that after applying these rules on a weekly basis, good trades would also have volume indicators on binary options place. The first trade not executed would not have met all the requirements. Although the moving average shows a downward trend, we should buy a put option. However, the trend break in the indicator takes place above the 60 line, and the 40 MFI line is only triggered briefly. The second trade would have been clearer: A trend break above the 60 line was identified and simultaneously found the price is above the moving average.
Why Is Trading Volume So Important?
A long-running call option would have made a good profit here. The vertical line shows where an exit could take place - if a divergence becomes visible. The Volume indicators on binary options indicator shows a lower high, while the price has formed a higher high. The third and fourth trade would also have turned out to be a winning trade if the trading with the MFI indicator had clearly taken place, This is where the advantage of binary options becomes visible.
- Volume is highly relevant to binary options traders.
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Because if you do not have to choose an exit yourself, but a term, you are on the safe side, so to speak. With this strategy, a duration of four to option income example weeks would be recommended.
Conclusion The volume has always been a popular indicator.
While the OBV indicator continuously adds volume, the MFI indicator puts volume in relation to the average difference between successive closing prices. It thus represents the momentum of the volume.
It should be noted, however, that the volume as a basis - whether for a further developed indicator or as independent information - can develop its effect especially with individual values. In very liquid markets such as indices or currencies, the indicators are less suitable on a short-term basis, but are definitely useful on a weekly basis.
- The number of people involved in a given movement, relative toe the number of people involved on an average basis, is an key metric defining the strength or lack of strength in the market.
- Trading Volume — how to determine and use in trading?
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