Binary Options Volume

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Volume And Binary Options

Volume is highly relevant to binary options traders. It can help you identify profitable trading opportunities and avoid bad ones. This article explains how binary options traders can use trading volume for their trading.

In detail, this article will answer these questions:

  • What Is Volume?
  • Why Is Volume Important?
  • How Can I Measure Volume?
  • Trading Volume With Binary Options

With this information, you will immediately be able to add these values to your strategy and trade binary options with added confidence.

What Is Volume?

The volume defines how many units of an asset changed hands during a period. For example, when you are looking at a price chart with a period of 10 minutes and the last period had a volume of 1,000, 1,000 stocks swapped hands during this 10-minute period.

There are two important things to point out here:

  1. The value measures the number of assets, not traders. A value of 1,000 indicates that 1,000 assets were traded during this period, not that 1,000 trades were made. The 1,000 assets could be only one large trade or they could have been 1,000 separate small trades – the volume would be the same in both cases.
  2. Volume measures the underlying asset, not the number of binary options. A value of 1,000 indicates that 1,000 units of the underlying asset (the stock, index, currency, or commodity) were traded, it does not indicate the number of binary options traded based on the asset – the volume does not measure binary options.

Some traders would argue that it is unimportant whether the overall volume is the result of one large trade or many small trades. What matters is the overall relationship between demand and supply, and nothing else.

Also, it is important to understand that it only measures traders who buy or sell an asset. Binary options traders only make predictions about what will happen to the price of an asset, they neither buy nor sell it. Therefore, the volume ignores binary options. Some newcomers try to use this value to understand which assets are popular with binary options traders. That is not what the indicator does. Unless your broker specifically provides an extra indicator for binary options, the figure always indicators classic buy/sell supply and demand.

Why Is Volume Important?

To understand why this is important, consider these two scenarios:

  1. During a time with historically low volume, only two traders are left in the market. One of them decides to test his luck and places a buy order far below the current market price. The asset trades at £100, the trader sets a buy limit at £90. The other trader makes the rookie mistake of placing an unlimited sell order. Since the £90 offer is the only offer, it is also the best one. The asset jumps down by 10 percent and switches hands.
  2. While the U.S. stock exchanges were closed, the government published new economic data. The country is doing great, years of prosperity lie ahead. Many traders react enthusiastically and place buy orders. As the market opens the next day, all of these orders create a strong surplus of demand, and the market significantly jumps upwards by 3 percent.

In both situations, the market has shown a strong movement. In the first example, it jumped by 10 percent, in the second example only by 3 percent. Nonetheless, the second example would offer the better trading opportunity. The volume helps you understand why:

  1. In the first example, the price jump was the result of a single trader’s mistake. There is almost no chance that the majority of traders will consider this jump justified. It will conflict with the concepts of both technical and fundamental analysis. Consequently, the overwhelming majority of traders will invest against the movement. They will think that now is the right time to take advantage of a market that has moved too far, which is why the market is likely to reverse and eliminate the original price jump.
  2. In the second example, the price jump was the result of many traders doing the same thing. There is significant support for this movement among traders, and it seems more than likely that other traders will soon make the same investment decision, or that traders who already have invested will invest again. The overwhelming majority will invest in support of the movement, seeing it as the beginning of something big. The movement is likely to last for a long time.

Of course, most real-life trading situations will be less black and white than this example. But the volume can nonetheless help you understand the importance of each single period. When a period has a high volume, its movements are usually more important to future price action than the movements of periods with a lower volume.

Simply put, remember this relationship:

  • Low period are weak because they lack the support of many traders.
  • High volume periods are strong because many traders support their price movements.

Even during trends, periods in the main market direction often show a higher volume than periods against main trend direction. By monitoring this, you can understand what is happening.

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

Binary Options Volume

Binary Options Volume

When trading binary options, there are many indicators you can use to extract information about the situation on the market. The more thorough you are with your analysis, the better your chances are to make the right prediction. One of the most important indicators you can use is binary options volume, which can tell you a lot about an asset’s strength. This is what we will be discussing in the rest of this article, so if you’re still not familiar with this aspect of trading, give us a couple of minutes of your time. Investing in education always pays off. Let’s see what you need to learn here!

Binary Options Volume | Advantages

Binary options volume is an indicator that tells you how much trading is going on on the market, i.e. how strongly traders feel about something. Bigger volume means people are executing more trades and are thus more interested in something. This Indicator is best used as a confirmation of strength. The easiest way to look at it is to use bar charts or candles because the volume is most clearly visible there, and you can quickly extract the information you need. However, be careful! When examining binary options volume data, you will most probably be presented with the data concerning only traders who are trading with the same broker as you. In other words, you will not get data about all traders on the market, but you can still make some pretty good conclusions, as general Trend Lines should still be clearly visible.

Binary Options Volume | Additional info

If you want more exact information, you should probably check out something like Commitment of Traders. This report is issued every Friday and can help you a lot because it gets you a lot of useful information. If you’re using this report, the advantages of long-term trading become very clear, especially if you’re trading in the second half of the month – in that case, it is recommended that you set your expiration date to the end of the month. This is also applicable if you’re by any chance using the Metatrader platform. Just set your binary options volume indicator under your chart (hourly charts are recommended for this type of trading) and look for candles breaking the level of medium-high spiking candles.

Binary Options Volume | Conclusion

Binary options volume tells you how much people are trading, which is a piece of information that can be of extreme importance, especially if you’re not sure about something. However, do be careful when taking it into account because brokers can only show you the volume concerning their own clients, so you can get a general idea, but never the whole picture. Use this indicator wisely and you will have a powerful tool. And if you need more useful information, just browse around our website – we have plenty of educational articles.

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Reference ID: #84ec0260-785e-11ea-b85e-39b538ca0445

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    Best Binary Options Broker!
    Perfect Choice For Beginners and Middle-Level Traders!
    Free Demo Account! Free Education!

  • Binomo
    Binomo

    Honest broker!

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