Question - Forex Trading Volume

How to Use Volume to Confirm False Breakouts?

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2 Answers
Conrad Rice
Answered 1 year ago
<p id="isPasted">When a trader spots a potential breakout, they will look for an increase in trading volume as confirmation of the breakout. If the breakout or breakdown is accompanied by higher-than-average volume, it means more market participants are involved, and it’s likely to be a valid and sustained trend change.</p><p>It’s important to also pay attention to volume divergence. For example, if prices are rising but volume is decreasing, it might indicate weakening buying interest and that the upward trend could be losing momentum. Conversely, in a downtrend, increasing prices accompanied by decreasing volume may indicate weakening selling interest.</p><p>Traders use …</p>
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Arturo Rose
Answered 1 week, 5 days ago
<p id="isPasted">Volume is the most critical tool for distinguishing a genuine breakout from a false breakout (fakeout). In a real move, volume should surge as a sign of institutional conviction; in a fakeout, the lack of "fuel" often causes the price to collapse back into its previous range.&nbsp;</p><p><strong>1. The Core Volume Principle</strong></p><ul><li>True Breakout: Price breaches a key level (support or resistance) accompanied by a volume surge of at least 50% to 100% above the 20-day average. This confirms broad market participation.</li><li>False Breakout: Price moves beyond a level on low or declining volume. This suggests "weak hands" are driving …</li></ul>
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