No Nonsense Forex
Trend traders prefer to avoid choppy markets, but an indicator can help detect when the market may become choppy or resume trending. In this episode, the host introduces a volume indicator that serves as a midline cross subtype but may be difficult to use due to changing top and bottom levels that affect the location of the midline. Though volume indicators may not work well as exit indicators, the host recommends testing the indicator for individual trading strategies and reminds viewers to keep trading simple and avoid overthinking things.
How Volume Indicators Can Help Trend Traders Avoid Choppy Markets
Introduction
As a trend trader, choppy waters are a nightmare. Choppy markets are best avoided altogether, but it can be difficult to detect them early. In this article, we will explore how an indicator, particularly a volume indicator, can help traders identify choppy markets and trend changes. Many traders have been searching for such an indicator, but there are limited options available. However, we have found one that could help, although it is a high-maintenance indicator that requires some patience and attention.
What Are Volume Indicators?
Volume indicators are technical indicators that measure the number of shares, contracts, or lots that are traded in a specific period. These indicators help traders identify the strength or weakness of a particular trend by analyzing the volume of trades. Volume indicators are crucial for traders who want to avoid choppy markets and confirm trend changes.
Why Are Volume Indicators Important for Trend Traders?
Traders often use volume indicators to identify changes in the market’s direction. When there is a sharp increase in trading volume, it typically indicates that a trend is developing. In contrast, a decline in trading volume can signal a trend reversal. Volume indicators can also help traders avoid choppy markets by highlighting periods of low and high volume.
The Difficulty of Testing Volume Indicators
Volume indicators are among the hardest technical indicators to test. Testing them on an indicator profile series is problematic, making it difficult to gauge their effectiveness accurately. As a result, every trader must conduct their tests to determine how effective a volume indicator is.
The Unique Nature of the Volume Indicator in this Article
This article focuses on a particular volume indicator that’s challenging to use and maintain. However, the results of the indicator are worth the effort. Despite its challenges, this indicator could help trend traders identify choppy markets and trend changes, making it a valuable tool in the trader’s arsenal.
Specs of the Volume Indicator
The volume indicator in this article dates back to 1992, making it a reasonably new tool for traders. As a volume indicator, it could be classified as a volatility indicator. However, it is part of the midline cross sub-type, making it different from other volatility indicators.
Understanding the Midline Cross Sub-Type
The midline cross sub-type is useful because it provides a binary answer to traders looking to determine the strength or weakness of a trend. A close above the midline indicates a weak trend, while a close below the midline signifies a strong trend. Therefore, traders do not need to rely on nuanced readings to make their trading decisions.
Problems with the Midline Cross Sub-Type
One of the challenges associated with midline cross sub-types is their inverted format. Traders who are not familiar with volume indicators often find the inverted format confusing. The midline cross sub-type in this article presents yet another challenge – the location of the midline is not always at a fixed 50%. Rather, it varies over time, making it challenging to test the indicator accurately. Therefore, traders have to constantly adjust the midline of this specific volume indicator.
Is it Worth the Effort to Use this Volume Indicator?
Despite its challenges, the volume indicator in this article produces reliable results. However, traders must weigh the costs of the effort required. The indicator may require high maintenance, but it is a valuable tool for the trader’s arsenal. Through proper testing, traders can determine if this volume indicator is worth the effort for them.
Testing the Volume Indicator
Because volume indicators are difficult to test, traders must find a practical way to gauge their effectiveness. The author suggests using his automation block, which has a video embedded on how to test volume indicators on the mt4 strategy tester. This method provides accurate results that are comparable to live trading.
Conclusion
Using volume indicators is crucial for trend traders who wish to avoid choppy markets and confirm trend changes. This article explores a specific volume indicator that, despite its difficulties, could be a valuable tool for traders. Using an effective indicator is essential for successful trading, but traders must weigh the benefits against the costs of using each indicator carefully. By testing their indicators thoroughly, traders can identify the best tools for their trading strategies.
