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Hey...what about Volume?

  • Post #681
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  • Edited Oct 24, 2019 3:56am Oct 23, 2019 2:07pm | Edited Oct 24, 2019 3:56am
Quoting gravitist
Hey...what about Volume? Yeah, what about it? Spot FX isn't traded on an exchange (maybe LMAX is changing that), so there is no reliable volume information. Possibly one could use volume data from currency futures, but that is a different market than spot. The volume you get from retail brokers like Oanda is just retail customer data, so it's useless.
This issue/argument has been killed many times. There is statistical proof that tick volume from some brokers with large pool of liquidity providers(sell side) do correlate with futures data. As much as +80% or even 90%. Go google...i am not doing that for you. I have loaded futures charts and compared D1 real vs tick volume, the similarity is amazingly reliable. The problem I noticed is in some instruments, the reliability of tick volume diminishes greatly below H1
Quoting gravitist
Hey...what about Volume? Yeah, what about it? Spot FX isn't traded on an exchange (maybe LMAX is changing that), so there is no reliable volume information. Possibly one could use volume data from currency futures, but that is a different market than spot. The volume you get from retail brokers like Oanda is just retail customer data, so it's useless.
Respectfully I would disagree. While all of the above arguments are completely true and accurate I believe I have shown here in this thread (if you take the time to read all of it) that even tick volume can be used to your advantage if you use it "correctly"... that is if you use it to determine levels of buying and selling.

I, just today, again posted a comment on why tick volume is not the same as actual volume but I still hold it has value and can be used to greatly improved one's trading accuracy.

I can certainly vouch for this in my own experience and dare say there are individuals here who have also come to realize how profitable this data point can be.
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting gravitist
Hey...what about Volume? Yeah, what about it? Spot FX isn't traded on an exchange (maybe LMAX is changing that), so there is no reliable volume information. Possibly one could use volume data from currency futures, but that is a different market than spot. The volume you get from retail brokers like Oanda is just retail customer data, so it's useless.
Agreed, it's synthetic volume so not real..........
We trade what we believe!
Quoting rover99x
{quote} Agreed, it's synthetic volume so not real..........
The word "synthetic" implies that the tick volume is "manufactured" in some way. Here I must strongly disagree. This data is not fabricated at all. However since this number comes from a variety of different sources it is not the same like a "real" volume data point would be...so what??

Again I stress that if you take the time to read this entire thread (which you clearly have NOT) you might understand how we (I) am using the volume and what effects it can have on the accuracy of your (my) analysis. Knowing that tick volume is really a tick counter vs "real" volume transacted in a given time period is what is "useless information"... however, seeing WHERE (what price point) those transactions occur and using that information to show it's effect on price... this is where the usefulness of these data begin.

I guess then, that it really depends on how (or IF) you understand the structure of the market that allows us (me) to use ALL the available information to our (my) advantage and not dismiss it as "useless" or "synthetic" and somehow false.

Again I encourage you to read this entire thread (at your convenience) before formulating and expressing an opinion without knowing all the facts. And if you still disagree...no problem... don't use volume in your trading. Perhaps we'll agree on some other part of trading...or not.
Do more of that which succeeds and less of that which does not - Dennis Gar
Midway through the US session and toward the end of the week's first day...looks like an order flow inversion is forming on NZD/USD. I still haven't seen much in the way of selling exhaustion yet, but for all the buying at near the highs of the day, Price is falling. This pair has popped up on my radar and I'll by paying close attention again.
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Do more of that which succeeds and less of that which does not - Dennis Gar
Hi, DonPato. I was reading your thread and i was wonder if you by watching volume can predict what can happen in the next day? For example if tomorrow we can have trend continuation or probably reversal or consolidation ? Is that possible by watching volume?
Quoting tomson002
Hi, DonPato. I was reading your thread and i was wonder if you by watching volume can predict what can happen in the next day? For example if tomorrow we can have trend continuation or probably reversal or consolidation ? Is that possible by watching volume?
My crystal ball is in the shop...

But in answer to your question...no...I cannot predict the future. Anyone who claims otherwise is either a liar or a fool. There are certain "conditions" that exist in the order flow that, statistically lead to reversal. And assuming those conditions exist I anticipate a reversal and engage with the market to take advantage of the possibility. And also if those conditions are not present I anticipate a continuation of the current conditions until I see something change.

While at times it may seem predictive it is not. I (like everyone else) live and work in the moment of "right now" and must make my decisions in that vein. If I could visit the future then return to the present to make better trading execution I certainly would...as would anyone I presume.

But I'm sure you already knew all of this. What is the "real" question you seek? I'm quite sure it is not, "How do I predict the future?". What do you really want to know?
Do more of that which succeeds and less of that which does not - Dennis Gar
Revisiting NZD/USD:
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I appears the order flow "inversion" held over the course of the day yesterday and today, buying is supporting the lows where yesterday, selling in this same area was absorbed. And this is occurring in the same area where the selling dominance (in mid Oct) failed, producing the new high in price.
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
Revisiting NZD/USD: {image} I appears the order flow "inversion" held over the course of the day yesterday and today, buying is supporting the lows where yesterday, selling in this same area was absorbed. And this is occurring in the same area where the selling dominance (in mid Oct) failed, producing the new high in price.
I don’t see any candle on your chart; what’s the name of this trading tool?
Quoting NeilWagner
{quote} I don’t see any candle on your chart; what’s the name of this trading tool?
Each histogram represents 24 hrs of delta tick volume. In other words it's the daily candle. Earlier in this thread on multiple occasions I have posted the link to this tool.

I read it as the closest we can come to order flow charts on retail FX markets.
Do more of that which succeeds and less of that which does not - Dennis Gar
Excellent thread DonPato, been enjoying the read, gave you a mention https://www.cryptocraft.com/showthre...6#post12588456
Whats your thoughts on volume/activity (activity as I like to call it) on bit coin, could the same formula be used when there is weekend activity, while I use what you talk about in your thread (not to the word still figuring how you see what you see and the terminology) volume is just as big an element with regard to bit coin, thanks for the enlightenment, Detector
I don't need to be good at the game, only good enough to beat my opponent,
Quoting detector
Excellent thread DonPato, been enjoying the read, gave you a mention
Thanks for the kind words. I'm glad you found something of value here. Please feel free to contribute as you are able.

Quoting detector
Whats your thoughts on volume/activity (activity as I like to call it) on bit coin, could the same formula be used when there is weekend activity, ...
My provider only gives me access to BTC/USD. And for some reason my indicators don't seem to work on this pair. I suspect because it is even more decentralized than FX. However the concept would be exactly the same. On the issue of the weekends. I would treat them as I would gap periods (between active market sessions). They are periods of very low volume and thus would be vulnerable to all the same issues as any other low volume market. Reduced price movement mostly but also it would take very little volume (relatively speaking) to spike price in one direction or the other and thus one should be prepared for unusual volatility as well.
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
{quote} Thanks for the kind words. I'm glad you found something of value here. Please feel free to contribute as you are able. {quote} My provider only gives me access to BTC/USD. And for some reason my indicators don't seem to work on this pair. I suspect because it is even more decentralized than FX. However the concept would be exactly the same. On the issue of the weekends. I would treat them as I would gap periods (between active market sessions). They are periods of very low volume and thus would be vulnerable to all the same issues as any...
You deserve it, very little is talked about in depth with regard to volume, your examples, repeat, repeat, giving every stepped reason is pricless, I'm far from being the best and still struggling but would endorse embracing the volume concept, it's the fuel all markets run on.
I seen a difference in bitcoin volume last week, also looking for that big round number low, but the volume changed my mind for entry, pleased I took the gamble, if the price had not gapped Sunday I would have re-entered, tradition closes the gap, my reason for weekend activity, is the gap just missing data from the charts we read, if charted would it be organic or would it have gapped on a spike, anyhow enough of my ramblings, thanks for the reply, will continue to read the thread, any contribution I can, I will, I do find this high level "stuff" my terminology is not the best, thanks, Detector.
EDIT
DP, yes BTC/USD, sorry I wasn't specific, D
I don't need to be good at the game, only good enough to beat my opponent,
Quoting DonPato
{quote} Each histogram represents 24 hrs of delta tick volume. In other words it's the daily candle. Earlier in this thread on multiple occasions I have posted the link to this tool. I read it as the closest we can come to order flow charts on retail FX markets.
Is Delta Trick volume means real market volume? As I know; it’s really rare to get real market volume!
  • Post #695
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  • Edited at 12:50pm Oct 30, 2019 11:27am | Edited at 12:50pm
Quoting NeilWagner
Is Delta Trick volume means real market volume? As I know; it’s really rare to get real market volume!
I have explained this numerous times in this thread but for you...I'll do it again one more time.

Volume = the size of a transaction. 1 mini lot (0.1 lots/10,000); 1 standard lot (100,000); 100 standard lots (1.000,000). One cannot place any order in the market without also declaring the SIZE of the order. This is volume.

Transaction = a buyer and a seller agree to "transact" at a mutually agreed upon price. One buys, and the other sells and the "instrument" (in this case a currency) changes ownership. It is just like any other thing purchased or sold. One cannot buy something that is not for sale, and likewise, one cannot sell anything if no one will buy it.

Once a buyer and a seller agree to "transact" and the exchange takes place, that exchange is registered as a "tick" in a large computer called "the market".

Tick Volume = a transaction, regardless of size. Each time a buyer seller transact a tick is generated. Whether that tick is for 1 micro lot or 100 standard lots, it is still ONE tick.

Problem - the FX market is decentralzed meaning there is no central exchange where all participants are required by law to "settle" the day's activities. UNLIKE the stock, commodities, or futures markets, all transactions are private and mostly between large banks. Thus because there is no clearing settlement required by law...the big banks get together at the end of each day and "settle" their accounts among themselves. They do NOT report the Volume of the exchanges made...only the transactions (Tick Volume).

In other markets the central exchanges require that all accounts be reported and "settled" at the end of each day's trading. There are a few exceptions for very large transactions, but in general, all these kinds of markets are "transparent" and thus produce accurate data points, such as what you are used to seeing...open, high, low, close, VOLUME. This volume is VOLUME not tick volume.

Thus many here think that Tick volume is not useful because it only reports activity and not necessarily size.

Solution - Using net (or Delta) tick volume we can get a good idea of the Activity that occurred during the course of a 24 hour day and analyze where (what price) that activity occurred and whether that activity was buying or selling. This turns the formally useless data into something we can now assess and use to determine how price reacted to this activity.

Example #1: If you see a lot of selling at the high of the day...and price falls...then you know that the selling had the anticipated effect on price and you can understand which part of the order flow (selling) is dominant.

Example #2: Same situation as above. Selling at the high of the day...but price does NOT fall...in fact it rises. You can see that this selling was "absorbed" by passive buying interests and very soon, price may rise even further. Yes, even in light of the dominant selling.

Example #3: Price is falling and the dominant order flow (selling) is coming in lower and lower (closer to the lows of the day). While selling remains dominant, the selling at the lows is showing exhaustion because this selling is "break out" selling which usually means most (if not all) the sellers are already short and holding short.

Example #4: Price is stalled after falling...and selling is still the dominant order flow...yet price does NOT fall any further. What is left of the selling order flow (probably most retail at this point), is being absorbed by passive buying, and this usually signals the end of a move...a swing point is about to form (if it hasn't already).

So...that should conclusively answer any further questions on the usefulness of tick volume in FX trading. I have just laid bare my entire method of trading. It is completely discretionary and cannot be automated. There is no "magic indicator" or "gee whiz" computer program. It is simple straight forward decision making based on experience, and analysis of order flow. It is NOT sexy nor sought after because it requires the following from each and every trader:

  1. Ability to look at and "read" the order flow and how that order flow affects price
  2. Ability to recognize the current market condition in the moment of "right now" and connect each following "right now" moment inexorably into the future - one "right now " moment at a time.
  3. Ability to make good decisions in real time
  4. Not withstanding the above...Ability to admit you were wrong about your analysis and cut your loss short
  5. Ability to set reasonable and repeatable goals to as so maximize your profit potential...ie control your greed. Don't ask for the moon when the best you can get is the top of the next hill.

I hope this will answer ALL your questions about order flow and volume and that we can engage in a conversation about this subject from a mutually common frame of reference.

Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
{quote} I have explained this numerous times in this thread but for you...I'll do it again one more time. Volume = the size of a transaction. 1 mini lot (0.1 lots/10,000); 1 standard lot (100,000); 100 standard lots (1.000,000). One cannot place any order in the market without also declaring the SIZE of the order. This is volume. Transaction = a buyer and a seller agree to "transact" at a mutually agreed upon price. One buys, and the other sells and the "instrument" (in this case a currency) changes ownership. It is just like any other thing purchased...
Thanks a lot for long detail reply! Now I have the idea! Have a great day.
Quoting DonPato
{quote} I have explained this numerous times in this thread but for you...I'll do it again one more time. Volume = the size of a transaction. 1 mini lot (0.1 lots/10,000); 1 standard lot (100,000); 100 standard lots (1.000,000). One cannot place any order in the market without also declaring the SIZE of the order. This is volume. Transaction = a buyer and a seller agree to "transact" at a mutually agreed upon price. One buys, and the other sells and the "instrument" (in this case a currency) changes ownership. It is just like any other thing purchased...
Just for the record, I will print this off to use as reference while looking at chart volume, I hope to be able to post with some explanation in the future, when I make association to the thread, rather than just "see thread" would advise anyone new to trading/improving to do the same and study as you scan the charts, the summary is pricless, Detector
I don't need to be good at the game, only good enough to beat my opponent,
Quoting detector
Just for the record, I will print this off to use as reference while looking at chart volume...
Maybe I should write a book....

Seriously though thanks for the confidence. But please keep in mind that everything in this game is discretionary. IMHO there are no hard and fast rules...just good decision making.
Do more of that which succeeds and less of that which does not - Dennis Gar
Quoting DonPato
{quote} Maybe I should write a book.... Seriously though thanks for the confidence. But please keep in mind that everything in this game is discretionary. IMHO there are no hard and fast rules...just good decision making.
Certainly be good topic and content, you read my mind if you excuse the pun, while I have read a few books my thought was "How many authors can you ask questions"
Agreed, one day something works well, next not so, but one thing is consistent, you just need to understand it more, if not move on to something that's showing it clearly.
I've been using volume/activity for a while so understand your approach to "Discretion", add a little bit more into the mix and you can get a great advantage, D
I don't need to be good at the game, only good enough to beat my opponent,
Quoting DonPato
Hello friends...I just wanted to bring up what I consider a major warning sign for anyone who still has a bearish bias on AUD/USD. {image} There is some MAJOR selling going on right now at a level that I would anticipate selling to occur. In fact at least 70% of the day's selling is occurring right now as I write this. While I would anticipate that this might happen, what I did NOT anticipate is that price continues to rise even though this selling is going on. Again...in spite of all this selling price's reaction is to continue to rise... Interpretation....
Don gave the warning weeks ago about AUDUSD...

Look at it today....

Don the DeltaMan
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