VOLUME

Volume is an important indicator that most traders like to add to their price charts. It reflects the number of shares or contracts of an asset that has been traded in a specified time interval. Most price charts with volume display it below the price data in the form of a histogram, with taller columns representing more shares or contracts traded. Some trading programs even allow traders to build charts where candles or bars represent increments of volume instead of time. Binary option traders should play close attention to volume because it can give important clues for short-term moves.

Stock and futures traders—or binary option traders that trade options with stocks or futures as underlying assets—pay particularly close attention to volume. Since stocks and futures are traded through central exchanges, it is easy to track the number of shares or contracts that have been traded during a period of time. The central exchanges distribute the volume data to the trading platforms of investors and traders. Most traders watch for periods of increasing or decreasing volume to help predict short-term price action. Typically, a period of increasing volume that culminates in a volume spike followed by a sharp drop is considered to signify the end of a market move.

Forex traders do not have the benefit of central exchanges that track the volume of currency-pairs as they are traded. Sometimes large brokers can provide local volume data, but it is not considered to be nearly as meaningful as the data provided for stocks and futures by their central exchanges. Traders who enjoy trading forex products and would like to use volume in their trading should consider trading currency futures instead. The price action is the same and volume data is readily available.