Volume Oscillator Indicator MT4 | MT5

The Volume Oscillator is developed to compare two moving averages of volume, typically a short-term EMA and a long-term EMA. The formula is: Volume Oscillator (%) = 100 * (Short EMA - Long EMA) / Long EMA

Moreover, the indicator shows the relative strength or weakness in trading volume over time. The indicator fluctuates around the zero line:

• Positive values indicate that the short-term volume is higher than the long-term average; it signals an increasing momentum.
• Negative values suggest that the short-term average is lower than the long-term volume; it indicates a decreasing momentum.

 However, this indicator does not track price directly but provides context about the strength behind price movements. It helps traders in several trading strategies, such as:

• Trend Confirmation:

- When the indicator's line rises above zero during an uptrend, it confirms the buying pressure.

- When the Volume Oscillator falls below zero during a downward trend, it confirms the selling pressure.

• Divergence Strategy:

- If the price rises while the volume falls, it may signal a potential bearish reversal.

- If the price drops while the oscillator rises, it could signal a potential bullish reversal.

• Breakout Confirmation:

- An increase in the indicator's values following a consolidation period often signals the beginning of a new trend.

1/ In the first trading example on the MetaTrader 5 chart, the rise in volume during the uptrend confirms the strength and continuation of the bullish movement, signaling a buy opportunity. However, toward the end of the trend, while price continued to climb, the Volume Oscillator began to decline, signaling a potential bearish divergence.

The appearance of a significant bearish candle, coupled with a sharp increase in volume, both validates the shift in momentum and confirms the start of the downward trend, offering a shorting opportunity.

2/ In the second trading example on the MetaTrader 4 chart, the rise in volume during the downtrend confirms the strength and continuation of the bearish momentum, indicating a short opportunity. Toward the trend's end, while price continued to drop, the Volume Oscillator began to rise, signaling a potential bullish divergence.

The appearance of a significant bullish candle, coupled with a sharp increase in volume, both validates the shift in momentum and confirms the beginning of the upward trend, offering a buying opportunity.

3/ In the third trading example on the MT5 chart, the price consolidates, reflecting an indecision phase. A decisive break of the Volume Oscillator above the zero line, accompanied by a strong impulsive, signals the potential beginning of a new trend. The appearance of bullish candles following this breakout further confirms the initiation of an upward movement and signals a long opportunity.