# Binary Options Volume: Analysis & Assumptions - The Interpretation

Binary options volume - analysis & assumptions 2020: correctly interpret the indicator in 3 steps. Get informed now & trade binary options.

One of the common criticisms of indicators implies that their informative value cannot be stronger than the price trend itself. This is not surprising, since most technical indicators are calculated from the data of the price trend. Nevertheless, they are quite popular. This is partly due to the fact that traders have their own preferences as to how they want to best analyze the course of the price.

A trader likes it rather simple and already sees everything in the price, the other in turn feels comfortable with the presentation in the form of averages. In the end, it depends on the personal perspective and less on whether the indicator says otherwise or not.

As a rule, most indicators are calculated from the course. It is said that there is only one other dataset that does not depend on the price: the volume. But what is volume?

## Interpreting volume correctly

The typical chart image contains four variables, namely the

• closing price,
• high-,
• low and
• opening price.

What the chart cannot show is how this price came about. How much was bought or sold and how many market participants were involved? The volume thus represents the missing fifth variable.

An example: If the share price rises below a small volume, it indicates a weak demand-supply constellation and the increase would not be likely with a high probability long duration. On the other hand, a high volume indicates that large forces are at work here, i.e. investors are appearing on the market who can push the markets sustainably in one direction.

Some analysis methods can be derived from these findings:

1. The volume can confirm a trend reversal.
2. The volume can refute the interest in a trend.
3. The volume can confirm a trend.

To be able to carry out these analyzes, however, one must first be able to interpret the volume. The following assumptions are made:

1. Rising volumes and a rising price with interim resets confirm the trend.
2. Rising volumes with roughly constant prices indicate a possible reversal.
3. Weak volume and falling price: The demand-supply constellation is very weak. A possible sideways phase with a downward trend is likely.

## Analysis with volume based on the three assumptions

The lower chart shows the current price for the Apple stock. We now want to check whether the above-mentioned assumptions also hold true here.

• The first assumption is somewhat difficult to recognize on this short-term basis, because rising tendencies were often accompanied by stagnating volume. The first point can therefore not apply across the board.
• However, the second point can be demonstrated. With prices remaining almost constant or fluctuating within a band and increasing volume, the interplay between price and volume indicates a reversal. However, the excess volume is generated here by gaps.
• The third point can also be recognized with a lot of benevolence. This could also be the case at the moment, since no strong increase can be expected, while the volume is rather small and the price is giving way.

Accordingly, one can definitely come to the conclusion that the assumptions are too general are and should not be applied to any value without further ado. But what stands out clearly and could possibly be a good starting point for the interpretation is the following:

• An increased volume that initiated the trend should be replaced by a higher volume in the opposite direction.

In plain language: If the upward trend started with a high volume, the volume for a reversal must either be the same or higher. This can also be confirmed on the chart.

For the current case, it would also mean that the slight downward trend in the price of the Apple share is not over until the volume (last high blue line) Has not exceeded the range. This applies to the short downward trend. But is the big trend also at risk?

Maybe. The largest volume bar in the chart occurred during the last reversal. However, the large volume was caused by the GAP. The decisive factor is the bar afterwards, and this volume has already been exceeded by the recent sale. As long as this volume is not confirmed upwards, the larger upward trend is also at risk.

## Conclusion

The volume is an indicator that is not calculated from the price, but rather rather, it represents the amount converted - it can give weight to a movement in the course. However, the blanket interpretation of the volume should be treated with caution. It is therefore advisable to first check how the volume behaved in the past.

The volume analysis is mainly suitable for single values. Binary options brokers such as Banc De Binary offer single share trading.