The Value of Using Price-Volume Indicators in Trading
- On-balance volume
- Accumulation/distribution index
- Money Flow Index
- Chaikin Money Flow
- Others
These are the commonly used indicators by veteran traders to monitor the flow of money and/or momentum. They are often used momentum indicators in conjunction with price action analysis. Although they are 50.01% accurate, I still strongly think they are indispensable to technical charting because at the very least they sent out “hints” on where the price might go however vague it might be.
You can avoid disasters or exploit trade opportunities when you include them with your technical analysis. The key here is spotting bear or bull divergences in comparison to the price action.
Warning
As you become more active in using technical analysis (TA) in your trading, you will notice that your decisions seem to gravitate to relying on technical indicators such as the above and probably more like the MACD or the stochastic oscillator indicator. I urge you to resist on doing that!
Indicators are great as it is akin to knowing whether you’re on land or at sea, but it does not tell you where exactly you are located.
So basically, the signals they give are just good to know but not actionable. What is actionable is waiting for the break out or break down of the price before buying or selling.
