Volume Trading and how it works

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What you need to know

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Which instrument is used in volume trading?

Only futures are suitable. Why? All global orders for futures are concentrated in one marketplace (e.g. CME for S&P 500 futures), which publishes all orders, all executions, all volumes and all positions of professional investors. Open a futures trading account.

What do I need for volume trading?

You absolutely need tick-by-tick quotes. PLEASE NOTE: Many futures brokers, such as IB, offer 1/2-second snapshot quotes for cost reasons. You cannot use these quotes for trading and technical analysis. WH Selfinvest offers tick-by-tick quotes.

How much do tick-by-tick quotes cost?

You get FREE real-time tick-by-tick quotes from WH Selfinvest. These quotes cover the four CME exchanges. You can trade futures on the S&P 500, Nasdaq, Dow, gold, cryptocurrencies, etc.

The basic principles

Volume trading with NanoTrader

Volume trading (order flow trading) is very popular. What are the advantages of this type of trading and what tools are available to volume traders?

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Fundamentals and principles

Volume indicators can generally only be used in markets where representative volume is available. Futures are best suited. Equities are less suitable. CFD's cannot be used.

While most technical analysis indicators are derived from price, volume is an independent variable. Most traders are probably familiar with the classic volume indicator, which displays the traded volume per period vertically in a sub-chart. An intact upward trend is usually said to exist when rising prices are accompanied by rising volume. The same applies to downward trends. In correction phases, on the other hand, the volume is usually lower.

The building blocks

Market Profile (Volume Profile)

In order to better time entries and manage trades sensibly, many volume traders are more interested in horizontal volume. Specialised trading platforms such as NanoTrader provide this in the form of the Volume Profile.

The volume profile shows the traded volume at specific price levels. This gives a deeper insight into the current positioning of market participants. The volume profile indicator draws a histogram on the chart, showing key price levels based on volume.

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The Volume Profile visualises the following significant areas, for example:

  Point of Control (POC or VPOC) = The price level with the highest traded volume in the selected period.

  Value Area (VA) = The range of price levels in which a certain percentage of the total volume was traded during the selected period. This percentage is usually set to 70%. As usual, this value can be changed in the designer bar.

  Value Area High (VAH) = The highest price level within the value area.

  Value Area Low (VAL) = The lowest price level within the value area.

The VWAP

Another very useful tool for volume-based analysis is the VWAP. The VWAP is similar to the moving average, but takes into account the traded volume in particular. The indicator is extended by the standard deviations, which make it possible to define support and resistance in different time units.

The volume-weighted average price (VWAP) is, as the name suggests, the average price weighted by the volume traded. In short, prices at which the most volume was traded are weighted more heavily in the average calculation. The VWAP can be calculated for different time horizons, so that, for example, the daily, weekly, monthly or annual VWAP can be displayed in the chart.

he following example shows the VWAP and its standard deviations.

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The VWAP is a moving average that can be anchored at the start of the day, week, month, quarter or year. The first, second and third standard deviations (SD) of the VWAP are used to calculate the bands.

Assuming a normal distribution of traded prices...

1. approximately 68.2% of all trades are between -1 SD and +1 SD, and
2. approximately 95.4% of all trades are between -2 SD and +2 SD.

The unique Volume Viewer!

The FREE Volume Viewer displays a real-time animation of the order volume executed on the exchange.

Various settings for speed and colour enable volume traders to obtain meaningful live information for their trading strategy.

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Five advantages of the Volume Viewer

1. Converts Time&Sales into an animation

2. You can see when the market is accelerating

3. You can see the volume at all speeds

4. You can incorporate the information into strategies

5. The Volume Viewer is free of charge

Scalpers love the Volume Viewer.

Video : Volume Viewer scalping strategy

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The next step

A specialised broker for volume traders

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"Your support is really great, I only know this from big companies like Amazon! The explanation is really great, thanks." - Sebastian

WH SELFINVEST S.A., founded in 1998, has a broker license (nr. 42798), a commissionaire license (nr. 36399) and a portfolio manager license (nr. 1806) granted by the Luxemburg Ministry of Finance. The company is supervised by the "Commission de Surveillance du Secteur Financier". Based on its European passport, the company maintains: a branch office in France (nr. 18943 acpr) which is also subjected to the supervision of the "Autorité de Contrôle Prudentiel et de Résolution" (ACPR) and the "Banque de France", and a branch office in Germany (nr. 122635) which is also subjected to the supervision of the "Bundesanstalt für Finanzdienstleistungsaufsicht" (BAFIN). In addition WH SelfInvest has a representative office in Switzerland, which is also subjected to the supervision of the "Swiss Financial Market Supervisory Authority" (FINMA), and, based on the European passport, representative offices in Belgium and the Netherlands, which were notified to the relevant competent authorities in these countries.