medium · Volume Spread Analysis effort-vs-result-spread
A trader is looking at a chart of EUR/USD. They see a 4-hour bar that dips below the previous low into a support area and then recovers to close on its high. The 'Tick Volume' is the lowest it has been in 20 bars.
What is the most likely interpretation and subsequent risk-managed action?
- This is a successful 'Test' on tick volume; consider a long position with a stop below the bar's low.
- Tick volume has no real meaning in Forex, so wait for a scheduled news catalyst before entering.
- Low tick volume simply means the market session is closed or dormant, so no trade should ever be taken.
- This low volume shows the retail herd is quietly buying the dip, which is actually a strong bearish warning sign.
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