The years I have spent trading I have dedicated on the most widely used indicators. Specifically they are the momentum indicators – RSI (relative strength index), CCI (Commodity channel index) and the moving averages of any kind. Lately I have involved the use of volumes to identify the volatility and this article is on my latest research on the connection between volume and volatility. For most professionals who have traded long time this can seem obvious but maybe you can also find something new.
Traded volume highly depends on the opened markets session. Highest volume is during New York and European opened sessions - when they overlap. Usually this is the time when the volatility is at its maximum for the day.

Figure 1

According to the figure which is the latest EUR/USD setup we can see 3 things.
1)After breaking the support RSI and CCI are no more valid instruments for use.
2)The big volumes were extremely bearish
3) After waiting enough with a good setup for involving again RSI and CCI we can use the 70%RSI and some specific use of CCI for our next good shorting.
This is only an example. Usually we must have good statistics and of course this pattern will never repeat again. The idea here is that the most widely used indicators can be used some times as they are and some times you can reverse them when there are enough evidence of clear one way trend. The EMA (exponential moving average) can also be used as a point validating the entry. This example is very good because it shows that the price just touches the 200 hourly EMA the RSI touches 70% and the only slow reaction is of CCI. This is because CCI probably must be set to lower time period.

On next figure I would like to show the beginning of the up trend of EUR/USD which was 1 month ago before figure 1

Figure 2

Again there were two maximum volumes with bullish impact. During this period the RSI index never reached the level 30% (which is considered a buy signal). So you should have missed all the movement up until at least 1.13 which is approximately 600 pips. The idea here is that after a good prove of reversing you can simply reverse also the setup of the indicators. Reversing doesn't mean setting them to standard values (30 - 70 RSI for example) It is better to use a little bit higher values for example 45 - sell on downtrend, 55 -buy on uptrend. The EMA can be a tool also used opposite to standard widely used idea. For example if we have downtrend always sell until the price is under the EMA. From my observation I have found 1 hour chart of most valid for such setup. For setting a strategy it is good to use the 5 minute chart. Volume can be used either implemented in strategy or just for observation and confirmation.
Conclusion
The most often used indicators are good tool for simple strategy but in some cases they must be used with extreme caution and you must consult other tools like volume indicator which can help you to use the momentum indicators on their reverse mode.
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