Why does Forex Volume Data Change Everything? | Forex Factory

Why does Forex Volume Data Change Everything? | Forex Factory

Why does Forex Volume Data Change Everything?

From dailyfx.com

FXCM, parent company of DailyFX, has made it possible for users to see live FX volume figures on their currency charts. The new data promises to change the way we look at our trading charts. Why? Put simply, the ability to study volume adds an extra dimension of insight into trading crowd psychology and allows us to see detail which was previously invisible to the trader. Unlike in centrally-traded and cleared markets such as Equities and Futures, forex trading does not trade in any single exchange. That means that there is likewise no single place for volume data, and as such we have historically been unable to use ... (full story)

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Jun 18, 2014 7:28am

What matters is not the actual volume but when notable changes in activity occur.

We matched the FXCM real volume to the MT4/5 tick "volume" and the notable changes were obvious on both at exactly the same times and practically to the same degree.

A previous study of tick "volume" vs real volume concluded the same. Tick "volume" is a very close match to real volume. And when you are looking for the times there is a significant change, they both yield exactly the same clues.

In other words, real volume is no real advantage over tick "volume". MetaQuotes has it right, and there is no reason to lust after a broker because of a broker specific trading platform offering 1001 indicators to befuddle, confuse and distract the trader from learning how the market really works.

If a broker honestly wants to help the retail trader be more successful, then reduce spreads and improve order execution, and that includes ceasing the practice of blocking traders from getting their orders executed during those rare times when everyone knows it is the place to enter.

Jun 18, 2014 10:56am

Volume, whether it is tick or real, is only of use when you're able to interpret it in relation with a developing candlestick pattern. If the market is at a high and there is an expectancy for a turn downwards together with a pickup in volume it doesn't mean the market will go south. You must be able to interpret every single chart bar in comparison with the specific volume bar to try establish what the players are thinking during the development of the specific pattern.

I don't use volume. A 5 bar candlestick pattern is suppose to give you enough indication of direction. If not, just skip it and wait for the next setup.

Jun 19, 2014 1:40am

Quoting jw1981

Disliked

Save yourself the trouble mate. If FXMC spent half the money they currently spend on their marketing and put it to making the platform better, you wouldn't be here justifying the spreads and off quotes/re quotes in the first place.

Good luck and happy newbie trader hunting!

Ignored

Don't you think this is a bit harsh and uncalled for?

Jun 18, 2014 6:37pm

Quoting jw1981

Disliked

Traded a demo once with FXCM (was some competition). Horrible re-quotes during the first 5 days of trading and I don't bother with them.

Ignored

Hi JW,

There seems to be some confusion. You were trading on a demo account. There are no re-quotes with FXCM on live or demo accounts. Furthermore, I don't think there's any broker (even one that re-quotes their live clients) that would re-quote you on a demo account.

A re-quote occurs with a dealing desk broker does not want to fill your order at the price you request because it would put them at risk of losing money. With a demo account, there is no money on the line, so there's no need for even a dealing desk broker to re-quote you.

If you were using an MT4 demo, most likely what you encountered was an "off quotes" message. That is part of the Maximum Deviation feature designed to help you minimize negative slippage. Here's a detailed post with more info on this: http://www.forexfactory.com/showthread.php?p=7243540#post7243540

On MT4 platforms with some brokers, the Max Dev feature is unavailable, or if it is available, then it will limit both your negative slippage and your positive slippage equally. By contrast, FXCM enhanced how Max Dev works on our MT4 platform allowing you to limit your negative slippage while still enjoying the full benefits of any positive slippage (AKA price improvements).

Jun 18, 2014 6:57pm

Quoting Taffy

Disliked

VPA and VAP .... only the most successful forex traders know this, so don't knock it.

Ignored

You make a good point, Taffy

As you can see from this 1-minute chart below of the recent ECB announcement there's definitely a correlation between Real Volume (top), Tick Volume (middle) and Transactions Volume (bottom): http://i.imgur.com/nnSJFpR.png

However, what's interesting is the notable difference when there is a large spike in real trading volume. This demonstrates that tick volume has no way of showing when huge amount of volume trades at a single price, since that would be counted as a single tick.

Real Volume and Transactions indicators can provide us with a different perspectives on what's happening. I won't go as far as to say this information is necessary for all strategies. We all know that forex traders have been making due without real volume information thus far.

However, new knowledge always offers new opportunities, and I'm looking forward to seeing the creativity of traders in using our Real Volume and Transactions indicators. We've already had a great response to the initial release.

Jun 17, 2014 9:21pm

This says it all "And though a sharp spike in volume hardly guarantees that price will reverse, it does suggest that traders find price has hit an important turning point."

" If Real Volume is very high while Transactions are relatively low, it suggests that larger traders are the most active participants in a big move. This matters because our client profitability data shows that those with larger account balances tend to be more successful at trading FX. "

Wow a surprise if people that don't Over leverage themselves got money to burn are successful that means.. You as a trader are a failure!! so follow the sheep with a hardly conclusive indicator and you shall be a winner!

In plain terms: large Volume spikes can often represent what “Smart Money”

Rofl.. First I hear of "Smart Money" must be a new coined phrase for something that is opposed to being "Dumb Money" I need to hire this writers.. Golden!

"And thus we see the true value of the indicator: getting real-time insight on the significance and importance of currency moves."

All other indicators are now deemed useless the true indicator that indicates "Smart Money" has been invented linked to FXCM which concludes that if you are rich and have tons of money invested into Forex you are successful without even having to do anything.

Jun 18, 2014 3:20am

Traded a demo once with FXCM (was some competition). Horrible re-quotes during the first 5 days of trading and I don't bother with them. If spreads aren't good and price isn't executed at the price mentioned, nothing else matters.

Jun 19, 2014 12:05am

Quoting Jason Rogers

Disliked

Hi JW,

There seems to be some confusion. You were trading on a demo account. There are no re-quotes with FXCM on live or demo accounts. Furthermore, I don't think there's any broker (even one that re-quotes their live clients) that would re-quote you on a demo account.

A re-quote occurs with a dealing desk broker does not want to fill your order at the price you request because it would put them at risk of losing money. With a demo account, there is no money on the line, so there's no need for even a dealing desk broker to re-quote you.

If...

Ignored

Save yourself the trouble mate. If FXMC spent half the money they currently spend on their marketing and put it to making the platform better, you wouldn't be here justifying the spreads and off quotes/re quotes in the first place.

Good luck and happy newbie trader hunting!

Jun 17, 2014 8:35pm

Another marketing pitch just like market depth tool?

Jun 17, 2014 10:20pm

VPA and VAP .... only the most successful forex traders know this, so don't knock it.

Jun 18, 2014 3:01am

LMAO, MACD and oscillators? Hahahahaha.

Quoting Guest

Disliked

Interesting but does not beat what a 2 color MACD can do if a trader knows how to employ it for timing turns (as is true with a whole range of oscillators I might add). I think the most effective tools are those that tell a trader in simple terms whether price is in growth or in decay over the time interval for which the trader desires to invest. Volume analysis - does not fit that bill really and while there are those that specialize in such analysis and swear by it - I personally do not see how simpler views of the market are surpassed by it.

Personally...

Ignored

Jun 18, 2014 3:02am

Bingo.

Quoting Guest

Disliked

Spot FX is not a centralized exchange-based market. It is OTC. So FXCM can only show
their customer volume and maybe the volume from their liquidity providers. It's an incomplete picture at best, so I question its usefulness as a trading tool.

Ignored

Jun 18, 2014 7:48am

Spot on.

Quoting traderathome

Disliked

What matters is not the actual volume but when notable changes in activity occur.

We matched the FXCM real volume to the MT4/5 tick "volume" and the notable changes were obvious on both at exactly the same times and practically to the same degree.

A previous study of tick "volume" vs real volume concluded the same. Tick "volume" is a very close match to real volume. And when you are looking for the times there is a significant change, they both yield exactly the same clues.

In other words, real volume is no real advantage over tick "volume"....

Ignored

Jun 18, 2014 7:49am

Go away you failed, tiresome, banned troll.

Quoting Guest

Disliked

Even if there was collaboration among liquidity providers to the extent of pooling volumes to reflect more accurately the market - volume and transaction analysis still would not be a panacea. Indeed if it were possible to have the market centralized (in terms of data) trader performance would not necessarily improve - the evidence of course is that stock traders have no crystal ball still despite a centralized exchange.

However, the dailfx position is not to say they provide more than the guest in your quote suggests. They came clean on that...

Ignored

Trader#771A

Jun 18, 2014 1:32am

Spot FX is not a centralized exchange-based market. It is OTC. So FXCM can only show
their customer volume and maybe the volume from their liquidity providers. It's an incomplete picture at best, so I question its usefulness as a trading tool.

Trader#AA58

Jun 18, 2014 2:36am

Interesting but does not beat what a 2 color MACD can do if a trader knows how to employ it for timing turns (as is true with a whole range of oscillators I might add). I think the most effective tools are those that tell a trader in simple terms whether price is in growth or in decay over the time interval for which the trader desires to invest. Volume analysis - does not fit that bill really and while there are those that specialize in such analysis and swear by it - I personally do not see how simpler views of the market are surpassed by it.

Personally the specialized stochastic cycle oscillator I use to a) read the phase of flow and b) time entry would be more than adequate for the job. So not freaked out by this at all.

The Crow

Trader#833F

Jun 18, 2014 2:41am

Just another marketing ploy after all the bad news out of this company.

"smart money buying usdjpy rally" What a joke! So called smart money certainly does not buy into a rally.

Sounds like the VSA guys are pushing some sort of promo with FXCM.

Just another source of info for FXCM to manipulate as far as I am concerned.

Trader#AA58

Jun 18, 2014 3:29am

Quoting Spreadbetter

Disliked

Bingo.

Ignored

Even if there was collaboration among liquidity providers to the extent of pooling volumes to reflect more accurately the market - volume and transaction analysis still would not be a panacea. Indeed if it were possible to have the market centralized (in terms of data) trader performance would not necessarily improve - the evidence of course is that stock traders have no crystal ball still despite a centralized exchange.

However, the dailfx position is not to say they provide more than the guest in your quote suggests. They came clean on that and pointed to recent correlations of spikes with price movements based on their "sample" data. Whether this continues to hold of course is another question. I would frankly just not bother - if as I assume you are an FXCM client?

The Crow

Trader#91F3

Jun 17, 2014 7:31pm

No, we don't care about retail trader volume data.... Unless it is to do exactly the opposite!!! Thanks FXCM, this could become the simplest yet more profitable trading system yet...

Trader#5BE3

Jun 18, 2014 5:35am

You can use Future volume for traded currency pairs anyway to get some clues.

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