The Volume Oscillator is a powerful tool that traders can use to gauge market momentum, and it’s particularly handy when working with MetaTrader 5. Essentially, it represents the ratio of two moving averages calculated on trading volume.
How to Calculate the Volume Oscillator:
LongEMA = EMA(Volume, LongPeriod)
ShortEMA = EMA(Volume, ShortPeriod)
VolumeOsc = 100 * (ShortEMA - LongEMA) / LongEMAWhen you notice a price increase or decrease alongside a rise in volume, it can indicate the strength of the current trend. If the Volume Oscillator is above the zero line, it often confirms the direction of the price and the prevailing market trend, whether it’s bullish or bearish.
On the flip side, a price change accompanied by a drop in volume might suggest that the trend is losing steam. If the Volume Oscillator falls below the zero line, this could indicate that the price action and overall market trend are weakening.
Divergences in the negative area of the oscillator are key signals to watch—they can hint at a potential trend reversal on the horizon.
The indicator fluctuates above and below the zero line, providing insights into the price trend's strength. Positive values of the oscillator suggest solid market support for the current price direction, while negative values indicate a lack of support, suggesting the price may be stagnant or even poised for a reversal.
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