Best Volume-Based Intraday Trading Strategies

Volume-Based Intraday Trading Strategies: Whether you do intraday trading or swing trading, long-term investing or option trading, volume is used everywhere and after price the most important thing in a chart is volume, that’s why in the world of trading, the importance of volume is very high. 

No matter what kind of trading you do, volume is one such thing which will increase your profitability, reduce losses and you will be able to make more profit from the market. Price and volume are the only two things which are obtained from the actual market, the rest are every tool and indicator derived from price and volume. 

If you are an intraday trader and do short-term trading and do not look at the volume, then it’s very difficult to earn money in intraday trading. 

So today in this article, we will tell you about the beneficial volume-based strategies and indicators, through which you will get a lot of help and make some good confirmations. These can be very effective for all the strategic beginners who can improve their trading skills by doing these. 

What is Volume in Intraday Trading?

Total number of shares exchanged between buyers and sellers, if we understand in simple language, the total number of shares traded in a particular time in a script is called volume.

For example, if person A has to buy one share and person B has to sell one share for ₹ 100, then the transaction between these two means the total number of shares exchanged is 1 and this is called volume. 

Do you think that in one stock it’s possible that more shares are being bought and less are being sold? It’s not at all possible that more people are buying in one stock at a time and less people are selling. [Volume-Based Intraday Trading Strategies]

Because think about it shares are not something that is being manufactured. Shares are limited, so if you want to sell your share then you will only be able to sell that share when someone else wants to buy it. 

And if you want to buy a share then you will only be able to buy it when someone else wants to sell it. That means if 10,000 shares are being bought in a stock at a time, then they can only buy 10,000 shares when 10,000 shares are being sold. 

So this means that the volume tells us how many shares are being traded in a stock at a time.

Only when big investors or big traders are active in the market, we get to see big volume. They are active only when they know that the top price is going to go up or down. If you pay attention to the volume, it will give you signals in advance which you can place as an indicator on the chart. 

Best Volume-Based Intraday Trading Strategies

There are many metrics and technical indicators based on volume, some of them are popular indicators which you can use in intraday trading to improve your trading style. 

On Balance Volume (OBV)

On Balance Volume is a cumulative indicator that helps to measure of buying and selling pressure of any stock according to its trading volume. OBV helps in identifying trends, identifies divergence and confirms signals. 

This indicator can help traders in identifying trends in the market. If it’s moving in the direction of the stock, it indicates that the trend is strong and may move further. 

But if the OBV line is moving in the opposite direction, it indicates that it is weakening and this trend may reverse.

When the stock price is increasing and the OBV line is decreasing, this divergence shows that the trend is weak and trend reversal can also happen. 

When any stock breaks the resistance level and the OBV line is in higher position, then it’s a signal of a bullish breakout. So you can definitely use this indicator for profitable trades. [Volume-Based Intraday Trading Strategies]

Read More: 7 Golden Strategies for Intraday Trading in 2024

Volume-Weighted Average Price (VWAP)

The Volume-Weighted Average Price indicator is considered to be the best intraday trading indicator which measures the average price. 

If the price moves above the VWAP line, then it is considered bullish and if the price moves below the VWAP line, then it is considered bearish.

If the price action moves above or below the line, then it gives very good results but if the price is moving near the line then you can take trade. If the price is moving far away from the line, then you should avoid taking trades.

We can also use VWAP as support and resistance, if there is a big bar candle form. The best time frame for that is on 5-minute and 15-minute candle and if you do it in combination with PCR, so you will get the best results. 

Cumulative Volume Delta (CVD)

Cumulative Volume Delta shows us the cumulative changes in volume traded by aggressive buyers and sellers in a given market, over a specified time period.

A positive CVD shows us that a trading period is dominated by aggressive buyers and a negative CVD shows us that a trading period is dominated by aggressive sellers and price may go downward. [Volume-Based Intraday Trading Strategies]

Read More: Top 12 Golden Rules for Intraday Trading

How to Trade with Volume in Intraday Trading?

Step 1: If you see that the price of the share is increasing and with that the volume is also increasing that means the trend is a strong trend because the price is increasing with the volume. If the price is increasing with the volume then this is a strong bullish trend. So if you take a trade in this, you can make profits.

Step 2: If the price is falling and the volume is increasing then the trend is a strong trend. But if the price is falling then it’s a bearish trend. 

Step 3: If the price of the share is increasing but the volume is either decreasing or it’s the same as it. So in this case, because the volume is decreasing or it’s the same as it is normally, it means that the trend is a weak trend.

And the price is increasing, so it’s a bullish trend, but it’s a weak bullish trend. So in such cases, if you take  trade in it, then there are more chances of losses.  [Volume-Based Intraday Trading Strategies]

Step 4: If the price of the share is decreasing but the volume is less than or equal to the average, that means this trend is also a weak trend. Because the price is falling, so it’s a bearish weak trend. So if you take a trade in this, you will have more chances of losing.

In this way, we can understand the trends by using volume. By using these 4 steps in different places, you can make your trading much better and can take very good trades. 

Conclusion 

Volume is a very important part of any chart analysis or when we analyze the market, volume becomes a very big factor. Price and volume are very important in the market, all the indicators are created by combining these two. All indicators are made when these two ingredients are added, then these indicators are formed.

When you see the volume in the chart itself, then you get an idea whether it is a stock or a particular chart, in which direction it can give its movement and if any movement is without the support of price and volume, then that movement does not hold any relevance for us.

if you use volume-based strategy in intraday trading, then it can prove to be very beneficial for you and you can also make big profit from it.

I hope you have liked the information we have shared in this article, to know more about intraday trading you can read our other articles too. [Volume-Based Intraday Trading Strategies]

Read More: Intraday Trading With 1000 Rs: A Step-by-Step Guide

Frequently Asked Questions — 

Which strategy is best for intraday trading?

Volume-based trading strategy, Breakout trading strategy, Momentum trading strategy, Scalping trading strategy and Reversal trading strategy are the best strategies for intraday trading. 

What is the best indicator for volume?

On Balance Volume (OBV), Volume-Weighted Average Price (VWAP) and Cumulative Volume Delta (CVD) are the best indicators for volume. 

What is the most powerful indicator for intraday trading?

The most powerful indicators for intraday trading:

• Relative strength index
• Moving Averages
• Volume
• Bollinger Bands 
• Stochastic Oscillator

Which indicator is most profitable?

Top 5 most profitable indicators are:

• Exponential Moving Average (EMA)
• Moving Average Convergence Divergence (MACD)
• Relative Strength Index (RSI)
• Volume-Weighted Average Price (VWAP)
•  On  Balance Volume (0BV)