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Volume analysis (including cluster) as a TA method

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Technical analysis is a complex of methods and forecast types to predict price changes. One of these methods is volume analysis. It shows the number of deals processed on the market, which can help traders make presumptions about how much other traders are interested in buying or selling different assets. The volume analysis can hardly be a solid argument for making a decision on a certain deal, but it is a useful tool that helps traders understand what is actually happening on the market. For instance, a decrease in trading volumes can show that the price may soon move in the opposite direction and the trend may change or, at least, that it may slow down.

There are three major types of volume analysis: vertical, horizontal and cluster.

Vertical volume analysis is shown as a histogram at the bottom of the chart, it shows the volume of assets moved between users within a certain period of time.

Horizontal volume is on the left of the chart, it shows the volume of trades for a particular price level. It reflects traders’ interest in a certain price and helps define the price movement corridor. Analyzing the volumes of each of these corridors can help traders make predictions of the further price movement. Maximum volumes usually mark the turning points, for they usually appear when bears and bulls have a fight.

Cluster volume analysis shows the volume of trading operations at each particular moment of time and for a certain price. Clusters with prices other than average are marked in color. Cluster volume helps to find out the levels of support and resistance; sufficiently growing volume shows that the players must have a particular interest for this price level.

During deals planning you can use either one of these methods or all of them in the complex.

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