Tick Volume is not an exact indicator. If you are familiar with the traditional uses of volume, you should quickly understand the significance of tick volume.
Traders generally use the following rules for volume analysis:
If prices are up and volume is rising, the market is strong.
If prices are up and volume is declining, the market is very weak.
If prices are down and volume is rising, the market is weak.
If prices are down and volume is declining, the market is strong.
Other rules you might find worthwhile are:
In a bull market, volume has a tendency to increase on rallies and to decrease on reactions.
In a bear market, volume has a tendency to increase on declines and decrease on rallies.
Trading volume usually increases dramatically at tops and bottoms in the price chart.
Computing Tick Volume
The tick volume study requires an Intraday chart. The computation for the tick volume study simply counts the number of ticks during the interval specified on the Intraday chart. For example, if you are monitoring a 5-minute Intraday chart, the tick volume study counts the number of ticks that occurred during that 5 minute trading interval.
The activity in the futures instrument has a direct effect on the tick volume study. In slow moving markets, this study is almost useless.
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