If you’re a trend trader like we are, you need volume in the marketplace, and you need it badly.
If you know how to determine if enough of it is there for you to make a good trade, you can move mountains.
Wind Beneath Our Wings
When there is volume in the Forex market overall, and when there is volume in a particular currency pair, price has a high chance of trending.
When volume is lacking, in a currency pair or in the market overall, price has a small chance of trending one way or the other.
Because volume moves the market. It’s the fuel. It’s the wind.
It is certainly possible for price to trend without it, but the odds are small, and we always want to put the odds in our favor the best we can.
Yeah, About That…
If you’ve been following the material for sometime now, you know we’re putting together an algorithm.
And all it is, is a structure for you to build your own system.
Every piece puts the odds more and more in your favor when it comes to entering a trade.
And a good Volume Indicator is a key piece of this system.
Without one, you never know if the odds are truly in your favor as a trend trader.
With one, you completely tilt the scales in your favor.
Yes, it’s that important.
We Win By Not Losing
This is a phrase I say ad nauseam in the video for this blog. Eliminating losses is a bigger part of my algorithm than creating wins.
Sounds bonkers when you first hear it. I’ll take it even further…
The algorithm, as I write it today on 12/6/2018, looks like this:
- Confirmation Indicator
- Volume Indicator
- Exit Indicator
1 and 6 have more to do with trade management. 2 through 5 have to do with entering a trade.
The Confirmation Indicator is very important because it’s the one real vehicle for trade entry. Make sure you have a good one.
2, 4, and 5? All they do, is take the losses your Confirmation Indicator gives you, and attempts to eliminate most of them, without eliminating the wins.
Yes, half of my algorithm is designed to eliminate losses your Confirmation Indicator gives you.
It’s that crucial.
The Part Where I Force The Video On You
You really need visuals here. Visuals the blog cannot provide on its own without a lot of squinting on your end.
You need to see me take a volume indicator and test it against a confirmation indicator.
And you also need to see how eliminating losses makes your trading account beastly over time.
And those visuals can only be seen in the video. So I will put it below.
The rest of the blog will focus on the one thing the video did not — journaling the results of you testing out your Volume Indicators
As you learned in Episode 11 of the podcast — there’s a very efficient and a very inefficient way to journal.
And as a bonus for viewing the blog for this video, I’ll show you a way to do this with ease.
Now watch this video!
Volatility Indicators Are In Play Here Too!
If you like the above video, you’re gonna love part 2!
Volume Indicators and Volatility Indicators are in the same family, and attempt to do the exact same thing — weed out losses we would have taken otherwise due to low volume/volatility.
The best way to approach this IMO is to search for “Volume Indicators” separately from “Volatility Indicators” when you do your searches.
Test them all. See who wins. Then let the forward testing begin!
But let’s go over how to do the initial testing first. As always, there’s a better way.
How To Test Your Results
You can just take the lazy route and do it in your head. It’s not hard. You just saw me do it.
You can also just write down the results manually off to the side somewhere.
But if you want to nerd out hard, and have spreadsheets on all this stuff so you can refer back to it later, keep reading.
Go to my favorite free spreadsheet, Google Sheets.
1 – Take the results from your confirmation indicator like we did in Episode 11 of the podcast.
2 – Make a copy!! This is key. Google Sheets autosaves, and this will ruin your data from before, if you don’t use a copy.
3 – Go in and delete any of the wins and losses your Volume Indicator would have prevented in that period of time.
4 – Record the difference in pips.
Was it +380? Was it -65? How did that Volume Indicator affect the bottom line?
Do this with every Volume Indicator you test from now on. The winner will become pretty obvious over time.
Don’t be bashful with the settings here. Tweak, adjust, and see what differences they make. I think you’ll be very surprised how far a little tweaking goes here and there.
If you want to REALLY land on the best Volume Indicator here, one you’ll ride with for a long time, this is the optimal way to do it in my opinion.
This is non-negotiable. We need volume, and we’re not getting good trade entries without it.
Test the shit out of these. Find one that consistently gets the job done, and enjoy all of the pips it puts back in your pocket.
But remember, never….ever….stop….improving. This game is beatable, but this game is never over.