Horizontal Volume Indicator

What is the Horizontal Volume Indicator?

The Horizontal Volume Indicator is an advanced charting tool that displays how trading activity varies with price levels. This indicator is also commonly known as the Volume Profile indicator. The indicator helps us identify support and resistance levels as well as liquidity gaps.

The Horizontal Volume Indicator does not come built-in on the MT4 platform. However, you can download it from the MT4 marketplace at a price or from third-party indicator creators for free. This indicator helps you piggyback on other traders by eyeing where trades are being placed.

How to Trade the Horizontal Volume Indicator?

The horizontal volume indicator is easy to trade once you understand what the volume lines represent. You will find charts with light-shaded volume lines and dark-shaded volume lines. The darker the lines, the more people are currently trading on those currency pairs.

You have to also keep an eye on the length of the horizontal volume lines. The longer the lines, the more trades are being placed at that price level. The length of the lines can help you understand the trend and whether the market is at support or resistance levels.

Certain lines will appear darker and longer than others. Those lines reveal that the most trades in that timeframe have been placed at that price level. This is a strong indication of market direction and will help you understand which way the market is going to shift next.

Buy Signal

The horizontal volume indicator gives out a buy signal when it looks like this:

USDJPY buy signal on the horizontal volume indicator
USDJPY buy signal on the horizontal volume indicator

The grey box shows the zone which is having the most volume of trades. If the top of the indicator has short and fewer lines while the bottom has more and longer lines, this means that the market is bullish and that it is going to trend in the upward direction. You can then see how the indicator was correct as the market started trending in an upward direction.

Sell Signal

The horizontal volume indicator gives out a sell signal when it looks like this:

USDZAR sell signal on the horizontal volume indicator
USDZAR sell signal on the horizontal volume indicator

The grey box shows the zone which is having the most volume of trades. If the top of the indicator has more and longer lines while the bottom has fewer and shorter lines, this means that the market is bearish and that it is going to trend in the downward direction. You can then see how the indicator was correct as the market started trending in a downward direction.

Horizontal Volume Indicator Pros & Cons

The horizontal volume indicator is one of the most popular volume indicators in the industry. Here are its pros and cons:

Pros

  • Easy to understand for beginners
  • Helps piggyback off other traders
  • Determines support, resistance, and liquidity gaps

Cons

  • Only shows the volume of recent market prices
  • Difficult to read on longer time frames
  • Not built-in on the MT4 platform

Conclusion

The horizontal volume indicator is a great tool that helps you make better trading decisions by enabling you to view the difference in the volume of trades at each price level. Although this tool isn’t built-in on the MT4, it is still worth downloading onto the platform. No matter what tool you use, always test it out first on a demo account to see if it works best for you.

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