Using Relative Volume to Confirm Buying, Selling, and Absorption
Summary
The document explains a volume indicator that compares trading activity with each candle’s price result. It distinguishes ordinary activity from unusually high or low volume and labels patterns such as strong bullish or bearish participation, climax volume, and absorption, where substantial activity produces little price movement. For example, a large bullish candle with high relative volume may support the interpretation that buyers are active, while heavy volume paired with a small candle may point to absorption or a possible turning point.
The indicator is presented as a confirmation aid for price action, breakouts, reversals near support or resistance, and fast intraday decisions. It may use tick volume for forex and CFD markets, while stocks, crypto, and futures may offer traded volume. The document gives illustrative interpretations but provides no performance data or testing. It cautions that volume labels do not form a complete strategy: traders should combine them with trend, market structure, support and resistance, or another entry method.
Key ideas
- Relative volume relates activity in a candle to the size and direction of its price move.
- High volume with a large bullish candle can indicate active buying participation.
- High volume with weak price movement may indicate absorption or a potential turning point.
- The indicator can help confirm breakout, reversal, and intraday setups.
- Volume signals require context from trend, structure, and other entry criteria.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.