Volume Indicators

"Volume precedes price." Most indicators (RSI, Moving Averages) are derived from Price. They are lagging. Volume is independent data. It tells you the conviction behind a move.

1. Traditional Volume Bars

The columns at the bottom of the chart.

• High Volume + Rising Price: Strong uptrend. Institutions are buying. (Safe to hold).
• Low Volume + Rising Price: Weak uptrend. Retail is buying, big money is sitting out. (Be cautious, reversal likely).
• High Volume + Falling Price: Panic selling. Institutions are dumping. (Bearish).
• Low Volume + Falling Price: No one is interested. Slow drift.

2. On-Balance Volume (OBV)

The OBV is a cumulative total of volume flowing in and out of a stock.

• If close > previous close, we ADD the day's volume.
• If close < previous close, we SUBTRACT the day's volume.

The Strategy: Divergence

• Bullish Divergence: Price is flat or falling, but OBV is rising.
  • Translation: Someone is secretly accumulating shares without moving the price. Expect a breakout soon.
• Bearish Divergence: Price is rising, but OBV is falling.
  • Translation: Price is going up on thin air. The smart money is distributing (selling). Expect a crash.

3. Volume Profile (Visible Range)

This is an advanced indicator used by professional traders. Instead of showing volume per Day (Time), it shows volume per Price Level (Y-axis).

Key Terms:

• POC (Point of Control): The red line showing the exact price level where the MOST volume was traded. This acts as a massive magnet for price.
• Value Area (VA): The range where 70% of volume occurred.
• HVN (High Volume Node): A fat bulge in the profile. Strong Support/Resistance.
• LVN (Low Volume Node): A thin gap. Price zooms through these areas quickly because there is no resistance.