Volume is usually shown as a histogram on the bottom of the chart. We recommend that you don’t use the
open interest volume, since this can be misleading. However, for real-time charts, tick volume may be used
where no transaction volume is available.
At this point, it is important to note that volume gives us an indication of the amount of activity that has
taken place during whichever timeframe is being monitored.
All markets move in ‘phases’; we can observe the market building a cause for the next move. These phases
vary – some last only a few days, some several weeks. The longer phases give rise to large moves, and the
shorter phases result in smaller moves.
The amount of volume taken in isolation means little – it is the relative volume we are interested in. The
chart below shows the relative volume indicator that is unique to TradeGuider. It is showing that there is
considerably more bearish volume in the market, which is why the prices decline on this chart. Once you
have established the relative volume of business, you must consider how the market responds to this
activity.
Chart