An experienced trader usually employs several indicators: one that is based on volume, one based on momentum (like the Stochastic Oscillator), and one based on volatility (Average True Range or Bollinger Bands). Combining these measures gives a “three dimensional view” of the market.
Using this method the traders can get a clear picture to determine a currency’s overbought/oversold levels. Volume is one of the simplest forex indicators which measures the value of a market move. It is the total number of buyers and sellers of a market move indicating the strength or weakness of a trend.
The concept behind its usefulness is that “volume precedes price” and therefore an understanding of volume is crucial to understanding the direction of price. On the forex market moves that are sustained by a higher volume are more important.
If the price of a currency pair moves strongly up or down the force of that move depends of the market volume for that period. This indicator is considered to be the second most valuable data after the price itself.