Wednesday, April 2nd, 2014 by Tim Lanoue
The dollar volume indicator is a financial instrument used to measure the total volume of a certain stock or security exchange over a duration of time. More often than not these terms are expressed in USD currency format and are used as a way to measure and gauge the total liquidity of these volume oriented assets.
How it Works
There are numerous things that can affect the dollar value of a stock or security exchange. Oftentimes the upcoming holiday seasons along with the release of new products or services that revolve around these stocks or security exchanges will affect the value of these assets in either a positive or negative way. Even if a high dollar volume is presented it does not always signify a strong economy, so when we are trading with this indicator we need to pay special attention to the length of the bars that are displayed by the indicator.
Applying Dollar Volume Indicator and Trading
When preparing to use this indicator it is important to make sure that the asset that we are watching is a stock, commodity, indices or future. Currency pairs will not work with this indicator because they do not have any volume, shares or contracts therefore this indicator will not measure any volume associated with the currency pair. Moving forward when applying this indicator into a binary options trading strategy I like to incorporate a simple moving average set at a period of 11 that aids in our signal process. As you can see the Dollar Volume Indicator measures the volume of the asset and its value is displayed to the far right and it is preset with a moving average that we use in combination with our signal moving average line. In order for a signal to be generated we need to wait for our white line to break our blue moving average line in a upward or downward direction. In order for a call trade to be placed we need our white line to cross our blue moving average line in an upward direction and have it followed by a green dollar volume candle and a bullish candle. So if we have a bullish candle, an upward break, and a green dollar volume candle then we are good to place a trade. On the other hand if we are looking for a put trade we need to make sure that our white moving average line crosses our blue moving average line followed by a bearish candle and a red dollar volume candle, if all that checks out then we are good to place our trade.
More Binary Options Indicators and Strategies
Best Expiry Times
Expiry times vary according to the time frame that we are watching our targeted asset. When using the Dollar Volume indicator it is most practical to use a trading time frame consisting of 15 minutes to 30 minutes. When we are using a time frame consisting of 15 minutes we want to make sure that our expiry time for the trade is no less than 15 minutes and no longer than 30 minutes. But if we are using the 30 minute time frame then we need to make sure we place trades that expire no less than 30 minutes and no longer than one hour. Any expiry times outside this expiration range will effect the probability of you winning the trade so it is important you follow the suggested time frames. If you have any questions or comments please feel free to leave them below.