Volume candles and how they can be used to make trade decisions

Hello,

Volume candlesticks are a very unique dataset that give us more information than the candlesticks we are used to. First, a candlestick is a type of price chart used in technical analysis that displays the high, low, open, and closing prices of a security for a specific period. Now with the Volume candlesticks, they are a type of chart that allows for a visual assessment of the volume of trades for each candle. These are still candlesticks, but the width of each candle depends on the volume of trades during the period of formation of this candle. The greater the trading volume during the formation period of the candle, the larger the width of the candle.

What does a candlestick say?

A candlestick will tell you what the market is doing and especially what the big traders are doing. Different candlesticks would tell you different situations in the market. Now let us look at classical examples using the charts herein. We will combine our knowledge on both the candlesticks and Volume candlesticks that is now available on Tradingview.


From our chart above all these small candlesticks tell us that the stock is in a correction. A correction is a situation where the market is moving in a sideways movement. Trading corrections are very difficult for most traders and it is advisable to avoid them if you have no or little trading experience. All the candles in our above zone also do not have substantial width or length telling you that the volumes traded during corrections are usually low and hence the reason why markets rarely move during such times.

understanding types of candles and their meaning

It is easy to note that the volumes began coming at the bottom. This can be seen on this chart
This is where the width of the candles began becoming bigger. This is a great significance that it's time to begin thinking of buying this stock since it was correcting and in an upward trend. The width kept becoming bigger and price kept moving upwards.

At the top after the candle closed the thinnest, it is easy to conclude that the volumes have now dried up and therefore the beginning of a bigger correction is coming. This is a great time for you now to take your profits and focus on the next trade as you await the bigger correction to complete.


We shall keep you updated when we see volumes return on this stock. This strategy coupled with technical analysis, fundamental analysis and market data is very strong in the trading cycle.

All the best