By Marco BösingVolume trading: what volume tells you
Volume trading means you look at where price is going and how many contracts traded along the way. It's worth learning if you trade futures, because there the numbers come from the exchange. On CFDs and spot forex nobody counts the whole market, and then you have no foundation.
As an institutional trader, I was measured on how good my average price was relative to the day's Volume Profile. So volume decided whether I had done my job well.
Risk Warning: Trading futures and other financial instruments carries significant risk of loss. Past performance is not indicative of future results. Only trade with capital you can afford to lose.
What volume counts
Volume is the number of contracts traded in a period. Every contract that trades has a buyer and a seller, and the two together make one unit of volume.
That is why volume has no direction. A big bar doesn't tell you that people bought. It tells you that a lot traded, and every buyer had a seller.
You can see who was aggressive, meaning who traded into the waiting limit orders, in the Footprint and in Delta, for example.
Don't confuse volume with open interest. Volume counts every trade, while open interest counts only the contracts still open.
What volume tells you that price doesn't
Price shows you where the market is. Volume shows you how much traded along the way. You can read three things from it.
What builds up in a sideways phase
On a candlestick chart a sideways phase is just sideways. Price won't tell you whether someone is building a long or a short in there. With volume and Delta you can sometimes see it earlier. Sometimes you see nothing at all.
Whether effort and result match
You look for lots of aggressive orders and hardly any progress in price. Passive limit orders are probably holding against them, and that is an absorption. On a candlestick chart all you see is an unremarkable candle. It is never enough on its own. It only confirms an idea you already have from context.
Where the market traded
Plot volume against price instead of time and you see where a lot traded and where the market ran through quickly. That is the Volume Profile, which is also where you'll find POC, Value Area and VWAP.
This is where institutions look. As an institutional trader, a very low price did nothing for me if hardly anything traded there, because a large order needs enough volume to get filled. Big buyers buy harder at good prices and slow down as price rises, because what they care about is the average price.
You only need one position, not dozens of partial fills. So the simple part of that logic is enough for you. You check whether price is currently inside or outside the area where most of the volume traded, and what that means in the current context.
Why volume on futures is real
On futures the exchange counts every contract. You trade ES and NQ at CME, electronically through Globex, where orders come together in a central order book. On every trade, CME Clearing stands between both sides as counterparty. So what your platform shows as volume is contracts that traded there.
Spot forex and CFDs don't have that one place.
| Market | Where it trades | What shows up as volume on the chart |
|---|---|---|
| Futures (ES, NQ) | On the exchange, in a central order book | Contracts traded, counted by the exchange |
| Spot forex | Over the counter, spread across many venues | In MetaTrader, the number of price changes per bar |
| CFDs | Over the counter, your provider is your counterparty | Your provider's data, no exchange counting along |
The FX market is over the counter and heavily fragmented. So nobody counts all the trades. The volume indicator in MetaTrader shows you on forex the number of price changes per bar, which is called tick volume. It tells you something moved, but not how much traded. Behind one price change there can be a small trade or a very large one.
CFDs are offered over the counter, and your provider is your counterparty. So the volume on your chart comes from your provider or its data supplier. There's more on this in futures vs. CFDs.
If you want to trade currencies and see real volume, take a look at CME's currency futures.
What you need for volume trading
You need real-time futures data and software that shows you the volume from it. I only look at volume and Footprints in ATAS.
Start there with PRO. START and PLUS show futures with a 15-minute delay, and you can't trade on that. Add a data feed and usually exchange fees. Which platform suits you and what it costs is in my platform comparison.
We use TradingView for overview and preparation. For volume analysis it is pointless to me, even with Volume Footprint. By default it calculates from aggregated intrabar data, and it decides whether something counts as a buy or a sell from price movement inside the bar. Those are not real individual trades. There is a mode that takes the side from market data, but it is off by default, needs a plan with tick data and doesn't apply to Volume Profile.
Is volume trading a strategy?
No. Volume gives you context, and you don't get an entry from it alone. Playing volume against price gets you nowhere either, you need both. A lot of volume at a level can come from buyers or from sellers. You can only judge what those people wanted from what happened before.
Blindly trading every flip in Delta doesn't work either. The same value tells you little in the wrong place. It depends on where you are on the chart, how the volume sits in the bar and what is going on that day.
Volume is only worth something in comparison. You always read it against the bars next to it and against the session, and the same number means something different in NQ than in ES. The US open is so heavy that everything before it looks tiny. That doesn't make the earlier volume meaningless, it shaped your picture at that moment. In quiet phases, on the other hand, a single large trade can distort everything.
Where to read next
Each of these tools shows you the same volume in a different way.
| Tool | What you see with it |
|---|---|
| Volume Profile | Where in price the trading happened, with POC and Value Area |
| Footprint | How many contracts traded at each price level |
| Delta and CVD | The difference between aggressive buying and selling |
| Big Trades | Where unusually large orders go through |
| Absorptions and exhaustions | Where someone takes the pressure and where a move runs out of fuel |
Is volume trading worth it for you?
If you trade futures, yes. You have the real numbers anyway. As a private trader you don't move the market yourself, you don't have the money for that. You have to spot where the big players are working and attach yourself to them, and that is what volume data is for. If you trade CFDs or spot forex, it's only worth it after you move to futures, because what's on your chart there isn't the volume of the whole market.
Start with real futures data, ATAS PRO is enough for that, and read the Volume Profile article next.
In our mentoring we show you how to read order flow in practice.