Reprinted from: http://www.alpari.co.uk/en/market-analysis-guide/technical-analysis/ad.html

Volume Indicators: Accumulation / Distribution (A/D)

Accumulation / Distribution indicator tracks the relationship between price and volume. The basic premise behind the indicator is that higher-volume moves in price are given greater emphasis than lower-volume moves (over the specified period of time).

If the bar close is near to its high, then part of volume is added to the Accumulation / Distribution indicator value (the closer the price the more percentage of volume is added). If the bar close is near its low, then part of volume is deducted from Accumulation / Distribution (the closer the price the more percentage of volume is deducted). If the close price is halfway between the bar high and low, then the value of the indicator is unchanged:

Accumulation / Distribution (A/D) indicator formula:

A/D = SUM (((CLOSE-LOW)-(HIGH-CLOSE))x VOLUME/(HIGH-LOW),N)

Where:

• CLOSE - a closing price;
• LOW - bar bottom;
• HIGH - bar top;
• N - the number of period which are used for calculations;
• SUM (...,N) - the amount for N periods.

Bearish convergence on Accumulation / Distribution (A/D) indicator

Accumulation / Distribution (A/D) indicator is similar in most aspects to the On Balance Volume (OBV) indicator but it is more complex. Accumulation / Distribution indicator signals are also similar to those of OBV indicator:

• if a new price high is confirmed by a new Accumulation / Distribution (A/D) indicator high this means that the bullish trend is strong;
• if a new price bottom is confirmed by a new Accumulation / Distribution (A/D) bottom this means that the bearish trend is strong;
• bullish divergence warns of the weakness of the uptrend;
• bearish convergence warns of the weakness of the downtrend;
• breakout of the trend line drawn on Accumulation / Distribution (A/D) indicator warns of the high possibility of the breakout of the trend line on the price chart.

In order to add Accumulation / Distribution (A/D) indicator to the chart in MetaTrader 4 use the "Insert->Indicators->Volumes->Accumulation Distribution" menu sequence.

Reprinted from: http://www.alpari.co.uk/en/market-analysis-guide/technical-analysis/mfi.html

Volume Indicators: Money Flow Index (MFI)

Money Flow Index (MFI) is similar to the Relative Strength Index (RSI). It is calculated as follows:

• Define a "Typical Price" (TP) for the specified period:
  TP = ( HIGH + LOW + CLOSE ) / 3
• Calculate "Money Flow" value (MF):
  MF = TP x VOLUME

  If "Typical Price" is higher than the preceding one then "Money Flow" is positive. If "Typical Price" is lower than the preceding one then "Money Flow" is negative.

• Calculate "Positive Money Flow" and "Negative Money Flow":

  "Positive Money Flow" is the total value of all positive money flows for the specified time period.

  "Negative Money Flow" is the total value of all negative money flows for the specified time period.

• "Money Ratio" (MR) is calculated as follows:
  MR = POSITIVE MONEY FLOW / NEGATIVE MONEY FLOW
• Then using "Money Ratio" calculate "Money Flow Index":
  MFI = 100 - ( 100 / ( 1 + MR ) )
  

Where:

• HIGH - current bar top;
• LOW - current bar bottom;
• CLOSE - current bar close price;
• VOLUME - current bar volume.
  

Overbought territory: 80-100; oversold territory: 0-20.

Use the "Insert -> Indicators -> Volume -> Money Flow Index" menu sequence to add Money Flow Index (MFI) indicator in MetaTrader 4.

Money Flow Index (MFI) signals:

• if a new price high is confirmed by a new indicator high it means that the bullish trend is strong;
• if a new price bottom is confirmed by indicator bottom is means that the bearish trend is strong;
• bullish divergence warns of the weakness of the uptrend:
  

  Money Flow Index

• bearish convergence warns of the weakness of the downtrend.

Reprinted from: http://www.alpari.co.uk/en/market-analysis-guide/technical-analysis/obv.html

Volume Indicators: On Balance Volume (OBV)

On Balance Volume (OBV) was developed by Joseph Granville. This indicator compares volume to price movements. Final bar volume is positive if the bar close price is higher than the close price of the preceding bar and vice versa. Cumulative value is calculated by adding and deducting volume depending on the movements of the close price.

On Balance Volume (OBV) indicator

On Balance Volume (OBV) formula:

• 1) If the current close price is above the preceding one, then:
  OBV (i)= OBV (i-l)+VOLUME (i)
• 2) If the current close price is below the preceding one, then:
  OBV (i)= OBV (i-l)- VOLUME (i)
• 3) If the current close price is at the same level as the preceding one, then:
  OBV (i)= OBV (i-l)

Where:

• OBV (i) - On Balance Volume (OBV) indicator current value;
• OBV (i-l) - On Balance Volume (OBV) indicator value in the preceding period;
• VOLUME (i) - current bar volume.
  

Note that On Balance Volume (OBV) indicator interpretation is based on the direction of the curve not actual values:

• If a new price high is confirmed by a new On Balance Volume (OBV) indicator high it means that the bullish trend is strong.
• If a new price bottom is confirmed by a new On Balance Volume (OBV) indicator bottom it means that the bearish trend is strong.
• Bullish divergence (bearish convergence) warns of the weakness of the downtrend (uptrend).
• A breakout of the trend line drawn on the On Balance Volume (OBV) indicator warns of a breakout of the trend line on the price chart.

In order to add On Balance Volume (OBV) indicator in MetaTrader 4 use the "Insert -> Indicators -> Volume -> On Balance Volume" menu sequence.

Reprinted from: http://www.alpari.co.uk/en/market-analysis-guide/technical-analysis/volume-indicators.html

Volume indicators: Overview

Absolute volume values on the foreign exchange market are unattainable even for government statistical organisations, so in order to estimate buying or selling pressure on FOREX we use tick volume, i.e. the total number of quotes for the specified time period. It is worth mentioning that in practice, absolute foreign exchange market liquidity tick volume values follow the number of total deals in absolute units.

The main principles of using volume indicators:

• when volume decreases it means that there is less interest, so it may be time for a reversal or price consolidation;
• when volume increases it means that there is more interest, so it may strengthen the prevailing trend or a new trend may appear;
• sometimes gradual decreasing in volume is accompanied by rapid price movements;
• volume highs signal that it may be time for a reversal.

As daily FOREX trading volumes are pretty much at the same levels, and with intra-day trading volumes dependant on the time of a day (during the Japanese session trading volume is at its lowest levels, but when the American session opens and the European session still continues trading, volume is at the highest levels), it is more advisable to use volume indicators only for short time periods (less than an hour), and which cover price behavior within one trading session (Japanese, European or American).