easy · 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 is meaningless in Forex, so the trader should wait for a news catalyst to enter.
- Low tick volume indicates the market is closed or dead, so no trade should be taken.
- The low volume shows that the 'herd' is buying, which is a bearish signal.
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