You should never trade trades based on a trend indicator. The volume oscillator (VO) is another indicator that will help you determine if a trend is breaking support or resistance. Basically, the old saying is true: without volume there is no price movement and without price movement there is no volume. Use that old saying to your advantage.
Many oscillators are like Percent Volume Oscillator (PVO) and Market Volume Oscillator (MVO) and are based on VO.
The VO calculation is based on two Volume Moving Averages (VMAs). The basis of the calculation is simple:
VO = [Fast VMA] / [Slow VMA]
Fast VMA is a short-term moving average and Slow VMA is a long-term moving average.
If we use VO (5, 20) as an example, the setting would be Fast VMA 5 bar and Slow VMA drown 20 bar. At 5 bar, Fast VMA is the shortest term and at 20 bar, Slow VMA is the longest term.
Basically, VO calculates the difference between 2 VMAs. This calculation shows the increase in volume and the possible activity of the abnormal volume. The VO tells us where the current volume is in relation to the average volume over a longer period of time.
If we take a look at the VO setting above, it means that when the VO is above 1, the fast VMA is more than the slow MVA and we can conclude that the market volume activity is higher than usual. In other words, we can conclude that there is an unusual increase in volume based on the parameters we have set (5.20).
Knowing how the basics of calculus work in VO, the indicator becomes a very effective tool in your trading. You should never rely solely on trend-based technical indicators. If you do this, you will only see half of the entire photo and it will result in more losses than you earn. When you combine your trend indicators with an oscillator like VO, you will be able to distinguish whether the trend changes are based on abnormal volume activity and decide whether or not to enter a trade.
One last thought is that you should consider a break in support combined with unusual volume activity as a panic sale and the opposite is true with a break in resistance, an unusual volume rise, which should be considered a greedy purchase.