price movements. Weis Wave Volume (WWV) is a technical analysis tool that combines price action with volume to offer traders a clearer understanding of market movements. It is based on the principles of Richard D. Wyckoff and further refined by David Weis.

By highlighting the relationship between price waves and volume, the Weis Wave Volume helps traders identify trends, reversals, and market strength, making it a popular tool in forex, stock, and futures trading.

Description

Weis Wave Volume is designed to show the cumulative volume of market waves, helping traders see the underlying market strength behind price movements. 

It adds up volume during price swings (waves) and displays it visually as histograms or bars. 

The core idea is that significant price movements should be accompanied by high volume, indicating the participation of large institutional players.

This approach enables traders to:

Confirm trends: Large price movements supported by high volume confirm a strong trend.

Spot reversals: Weakening volume during a price wave may signal an impending reversal.

Assess market strength: Volume patterns reveal the market’s underlying strength, even when prices seem to be moving steadily.

How to Calculate Weis Wave Volume

Weis Wave Volume accumulates volume during each price wave and resets when the price changes direction, forming a new wave. 

The volume is accumulated as long as the price moves in one direction (either upward or downward). Once a price reversal occurs, a new wave begins, and the volume starts accumulating for the new wave.

Components 

i. Price Waves: Price swings in either direction, categorized as “up waves” or “down waves.”

ii. Cumulative Volume: Volume is added up during each wave, representing the strength behind that move.

iii. Reversal Point: When price direction changes, the cumulative volume resets, and a new wave begins.

Trading Strategies Using Weis Wave Volume

1. Weis Wave Volume Trend-Following Strategy

This strategy is designed to follow the dominant market trend. Traders stay in the trade as long as the cumulative volume of price waves aligns with the trend.

Steps

• Identify the trend using price waves and confirm with Weis Wave Volume.
• Enter a trade in the direction of the trend when cumulative volume supports the wave.
• Exit the trade when cumulative volume starts to weaken or when an opposing wave shows stronger volume.

2. Weis Wave Volume Divergence Strategy

This strategy focuses on detecting divergences between price and Weis Wave Volume, helping traders spot potential reversals.

Steps

• Look for divergences between price waves and cumulative volume (i.e., price makes higher highs, but volume weakens).
• Enter a counter-trend trade when volume confirms weakening momentum.
• Use stop-loss orders to protect against false signals.

3. Weis Wave Volume Breakout Strategy

The Weis Wave Volume can help traders confirm breakouts and avoid false signals.

Steps

• Identify key support and resistance levels on the price chart.
• Wait for a breakout and confirm it with a surge in Weis Wave Volume.
• Enter a trade in the direction of the breakout once volume confirms the move.
• Set stop-loss orders below/above the breakout point to protect against fake breakouts.

How to Use Weis Wave Volume in Trading

1. Trend Confirmation

Weis Wave Volume is particularly useful for confirming trends. In a strong bullish trend, you’ll see increasing volumes on up waves and decreasing volumes on down waves. The opposite is true for bearish trends.

During an uptrend, look for increasing cumulative volume on the up waves. If up waves show large volume and down waves show smaller volume, it indicates strong buying interest (bullish trend).

In a downtrend, high cumulative volume on down waves suggests strong selling pressure, while weaker up waves indicate limited buying (bearish trend).

2. Spotting of Reversals

The Weis Wave Volume can also help identify potential trend reversals. When a price wave occurs with a significant volume decrease compared to previous waves, it signals weakening momentum, which could lead to a reversal.

If a down wave has a decreasing volume while up waves begin to increase in volume, it may signal a bullish reversal.

A bearish reversal is indicated when an up wave’s volume starts to weaken, and subsequent down waves show increasing volume.

3. Identifying Market Exhaustion

Weis Wave Volume is useful in detecting exhaustion in a trend. When price movements continue but are no longer supported by strong volume, it suggests that the trend may soon reverse or pause.

If the price keeps making higher highs in an uptrend but Weis Wave Volume shows declining volume on each wave, it may indicate that buying momentum is fading and a correction or reversal is possible.

Conversely, if prices keep falling in a downtrend with decreasing volumes, it could indicate selling pressure is weakening.

4. Breakout Confirmation

Weis Wave Volume is an excellent tool for confirming breakouts. When price breaks a key support or resistance level, the volume should ideally surge. Weis Wave Volume helps you see if the breakout is supported by strong market participation.

When the price breaks above resistance, look for a significant increase in the cumulative volume on the up wave. This confirms that buyers are stepping in and validating the breakout.

For a downside breakout, a large volume during the down wave signals strong selling interest and increases the likelihood of a sustained breakout.

Examples of Weis Wave Volume in Forex Trading

EUR/USD Trend Confirmation

Suppose you’re trading the EUR/USD pair, and it has been trending upward. Using the Weis Wave Volume, you observe that the up waves are accompanied by increasing cumulative volume, while the down waves show decreasing volume.

This indicates strong bullish momentum, and you can confidently stay in your long position, expecting the uptrend to continue.

GBP/USD Reversal Signal

In another scenario, you’re trading the GBP/USD, and it has been in a downtrend. However, you notice that recent down waves are showing diminishing volume, while the subsequent up waves are showing increasing volume.

This divergence between price and volume signals a potential bullish reversal. You might choose to exit any short positions and consider entering a long trade.

Advantages of Weis Wave Volume

1. Volume Clarity: Weis Wave Volume offers clear visual insight into the strength of price movements by integrating volume.

2. Trend Confirmation: Traders can better confirm trends by analyzing the volume behind price waves, ensuring stronger signals.

3. Divergence Signals: It provides early warnings of potential trend reversals through divergence between price and volume.

Disadvantages of Weis Wave Volume

1. Subjectivity: Identifying price waves can be subjective, leading to differing interpretations among traders.

2. Lagging Indicator: Like most volume-based indicators, Weis Wave Volume is reactive and may lag behind fast-moving markets.

3. Less Effective in Choppy Markets: The indicator works best in trending markets and may produce misleading signals during sideways or choppy price action.

Frequently Asked Questions 

1. Can Weis Wave Volume be used in all types of markets?

Yes, Weis Wave Volume can be applied to various markets, including forex, stocks, and commodities. However, it is most effective in trending markets and may be less reliable in choppy or sideways price action.

2. How does Weis Wave Volume compare to other volume indicators?

Weis Wave Volume is unique in that it focuses on price waves and cumulative volume, offering a clearer view of market participation behind price movements.

Other volume indicators, like the On-Balance-Volume (OBV) or Volume Weighted Average Price (VWAP), have different approaches to incorporating volume into trading decisions.

3. What is the best timeframe to use with Weis Wave Volume?

Weis Wave Volume can be used on various timeframes depending on your trading style. Day traders may prefer shorter timeframes like 5-minute or 15-minute charts, while swing traders may use 1-hour or daily charts.

Conclusion

Weis Wave Volume is a valuable tool for traders looking to combine price action with volume analysis. By helping to confirm trends, spot reversals, and validate breakouts, the indicator provides traders with actionable insights into market behaviour.

Its ability to visually represent cumulative volume makes it particularly useful in forex trading, where understanding market participation is key.