Trading volume strategy

I've found an interesting article about volumes:

PART ONE

I use a lot of different indicators and methods, but the one that has shown me consistent success is price and volume at support and resistance. Support or resistance areas come at previous highs and lows (that is why stock and indexes develop trading ranges, they bounce off previous highs and lows). I will show you how price and volume react to previous highs and lows and why price pushes through or reverses at these points.
Previous highs and lows in a stock or Index define current support and resistance areas. A Previous high or low in a stock or index is called a swing. I draw a horizontal trend line from the previous swing high or low to see at what price support or resistance will come in at in the future. These previous swing highs and lows are places where decisions are to be made for buy or sell orders. The horizontal lines drawn from previous highs and lows indicate where the support or resistance may come in the future.
Sometimes a picture is worth 1000 words. The Line graph of a stock or index below illustrates what a swing high and low are.
http://images.tradingmarkets.com/2008/howto/0416ord.gif
The following rules I have developed with price and volume came in part with studying the works of the master of price and volume, Richard Wyckoff. Mr. Wyckoff developed techniques in the 1930's that combine price and volume of equities that had price predictability. The techniques he developed stood the test of time and still work to this day. I have expanded on these ideas and came up with the following rules that I use daily in my trading. In order to keep this article brief, I will not go into all of the rules, but here are some that we can go over. Here we will view a price history to see where buy and sell signals developed.
Rules that I follow using price and volume to determine buy and sell signals on the Nasdaq composite and the NYSE indexes
1. Test of a previous high or low on 8% or greater decrease in volume and closes back below the previous high (or above previous low) imply a reversal. The market needs to break the previous high or low and then close back into the trading range to prove the point.
http://images.tradingmarkets.com/200...o/0416ord2.gif
2. Test of a previous high or low on 3% or less in volume shrinkage, imply that high or low will be exceeded.
http://images.tradingmarkets.com/200...o/0416ord3.gif
3. Always compare volume relationship to first high or low; even on 3rd and 4th re-test. The volume buy and sell signal relationship stay the same.
http://images.tradingmarkets.com/200...o/0416ord4.gif
http://images.tradingmarkets.com/200...o/0416ord5.gif

B.
http://images.tradingmarkets.com/200...o/0416ord6.gif
Important Note:
It's not what the volume figures themselves are that is important on re-test of previous highs or lows, but rather what percentage increase or decrease the volume has against previous highs or lows. These volume relationships will define if the market will pass through or reverse at these previous highs and lows.
4. Markets that break to new highs (or lows) on near equal or increased volume and then reverse back into the trading range, the last high (or low) will be tested if not exceeded.
http://images.tradingmarkets.com/200...o/0416ord7.gif
PS. The way to tell if the last high (or low) will be tested then reversed or exceeded is in the volume.
- If volume is at least 8% lighter on test of high (or low) then expect reversal.
- If volume is within 3% or less on test then expect continuation.
5. Markets that break to new high or low on 8% or greater decrease in volume and close outside of the trading range imply a false break and will come back into the trading range.
http://images.tradingmarkets.com/200...o/0416ord8.gif
6. Tops and bottoms of "gaps" act and work the same way as previous highs and lows. Tops and bottoms of gaps act and work like previous support and resistance zones. The same volume percent relationship works with the "Gaps" as they do with re-test of previous highs and lows.
http://images.tradingmarkets.com/200...o/0416ord9.gif
And here is the link to the article:
http://www.tradingmarkets.com/.site/...les/-76494.cfm

How can you appy this to Forex? Paris

Do you have the indicators that shows what is the volumn traded at that particular time?

I found volumes indicator from mt4.
You also can place an horizontal line in the indicator window and move it up and down to find past volume numbers.
There are also other custom made indicators through the other threads

does this really work on forex ? If price were to test swing high/low at off market hours the volume will surely be lower.

From the volumes color settings i've set the volume bars to the middle thicker line, that makes the volumes candles as wide as the price candles:

Looks promising...ill give it a look.

Thanks for posting.

though fx volume is not real volume - it could work as is on small tfs intraday
btw. there also was waadah attar buy/sell wolume ind. (codeabase)

Interesting take on volumes and price. Keep the thread active, i think it has some real potential and seems very simple. Will be putting this to practice on demo.

this is a volume moving average
can anyone summarise the points and give me a cheat sheet?

EURNZD, AUDNZD have been doing a nice 100 pips run.

Will it break the previous swing high at low volume?
Maybe not.

Where is gbpjpy heading at that low volume?

Hello

I dont belive that you calculate those 3% or 8.7 % volume diferrence on the bars...NO time for that. So do you have indicator that do job as you described above...?

I dont believe either. The concept i got from it is that if price bounced from a previous s/r on a specific volume and then price gets to the same s/r on a lower volume, chances are that the price will bounce again.

Constin....

are you still using volumes in your trading ?

Thanks.