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(binned per thread starter's request) Volume in Forex

  • #1
  • First Post: Edited Sep 8, 2024 10:15am Dec 18, 2022 11:43am | Edited Sep 8, 2024 10:15am
Dear Admins/Mods, Please delete this thread
  • #2
  • Dec 20, 2022 11:15am Dec 20, 2022 11:15am
Quoting TheCardinal
Hi guys, I think we have all heard the debate of volume in forex. 1. Tick volume is the same as forex volume (shown in some studies), therefore, volume can be useful BUT 2. If you compare ANY brokers in tradingview (OANDA, FXCM, PEPPERSTONE, etc), they ALL show different volume data. So.... is forex volume really reliable and accurate? I know some traders use futures volume, but again, can it really be useful since it shows a minority of the total volume? Can it really show the whole picture?
I don't see how it would be useful because FX is off-exchange
  • #3
  • Dec 20, 2022 4:07pm Dec 20, 2022 4:07pm
I think the volumes are suprisingly 'accurate' they do represent 'real' volumes to a large extent, however in practice pretty useless for trading.
  • #4
  • Edited 7:55am Dec 21, 2022 7:35am | Edited 7:55am
I am using the MT4 platform... The tools/indicators may need to be designed/developed/configured using M1 or M5 tick (volume) data (e.g. M1 TF use M1, M5 use M1, M15 use M1, M30 use M1, H1 use M1... then H4 use M5, D1 use M5 or M15 or M30, W1 use M15 or M30 ... etc.). With such data, it can provide much better data (tick/volume) for processing with your favorite indicator(s).

For each time frame before loading your favorite chart setup (with custom tools) or if you are setting up/installing/or if you have just login a new MT4 account, you may need to do the following (as shown in the attached image).
Attached Image (click to enlarge)
Click to Enlarge Name: Screen Shot 2022-12-21 at 9.35.24 PM.png Size: 299 KB

Step 1) Open an M1 chart
Step 2) Press the "F2" key to load History Center
Step 3) Navigate to the currency pair and the "1 Minute (M1)" history data for the chart you have open in your terminal (be sure to "double click" the "1 Minute (M1)" selection in the history center so it becomes the active selection)
Step 4) Then left-click once on any of the data rows in the right-hand window of the History Center (it doesn't matter which one)
Step 5) Click the "Add" button, this pops up another window titled "Bar" and the default selection is on the "year"
Step 6) Enter 1970
Step 7) Then select "OK"... and it creates a new bar with the timestamp and price info you just added.
Step 8) Now select "Close" in the History Center
Step 9) Navigate to your M1 chart of interest and then from the terminal window (press Ctrl-T) select "Journal "-> go to the main chart window and right-click the mouse button and select "Refresh"...this will refresh the chart and attempts to fill any time gaps in the chart data (which now includes your year 1970 data point) with server data

...continued...

Now your chart will have pulled anywhere from 2048 to 65536 M1 bars from your broker's server (not Metaquotes server) and is usually far more data than you can get the broker to cough up when you try and manually scroll your M1 chart back in time.
Since Frank Sinatra sings in his own way, my chart sing... I did it, my way
  • #5
  • Edited 8:22am Dec 21, 2022 7:56am | Edited 8:22am
Quoting TheCardinal
Hi guys, I think we have all heard the debate of volume in forex. 1. Tick volume is the same as forex volume (shown in some studies), therefore, volume can be useful BUT 2. If you compare ANY brokers in tradingview (OANDA, FXCM, PEPPERSTONE, etc), they ALL show different volume data. So.... is forex volume really reliable and accurate? I know some traders use futures volume, but again, can it really be useful since it shows a minority of the total volume? Can it really show the whole picture?
if you trade US majors, you can get accurate volume data by using a MT4 indy called CluserDelta. It’s data that comes directly from Futures markets of the CME exchange. The data is about 0.4 of a second ahead of forex and seems to show it proceeds the currency markets.

You will learn that markets are controlled by HFT Algo’s to create a centralised environment that acts like one exchange.

Don’t believe any Tick data study you read that states they are comparable to forex volume. Also don’t believe historical data coming from your broker is accurate.

It’s all a smoke screen to help bolster market liquidity.

.
Trading thin liquidity at the boundary of the charts
  • #6
  • Dec 21, 2022 7:58am Dec 21, 2022 7:58am
...about volume:

※ One of the Challenges in FX Trading ※

FX is one of the hardest markets from which to profit. Currencies are incredibly volatile and masquerade as normally distributed only to pop violently in the wake of major market events. “Impossible” 5-sigma moves are not uncommon, even in major currency pairs – as highlighted by the Brexit announcement.

Other than the infamous carry trade, which tempts traders with consistent, low volatility returns while leaving them short event risk, there are no risk premiums on offer from FX. No inherent beta means investors work hard for profits while contending with the impact of intermittent interest rate moves from central banks. More than perhaps any other market in the world, currency markets are driven by positioning and liquidity and speculation.

Furthermore, currency traders labor under a marked information disadvantage compared to their counterparts in the equity and fixed income worlds. The entirely over-the-counter global forex market is vast, fragmented, and opaque. There are no centralized exchanges where FX trades. As a result, while quoted currency prices are easily observable, executed currency volumes are not.


☛ “Volume Confirms Price”

This makes trading FX more difficult. Stock traders take volume data for granted and leverage it to the maximum. Price can reveal where the market is moving, but the only volume can tell how significant the move is. At the simplest level, “volume confirms price”: rising volume at the start of a trend suggests the trend will continue, while flat or falling volume suggests the trend will reverse. Trading with the price but no volume data is like driving with a compass but no speedometer: you know the direction you’re going, but you have no idea how much ground you’ve covered.

Apart from trading, the volume is also essential to judging market liquidity, transaction costs, and portfolio risk. It’s impossible to estimate the capacity of a strategy, or the friction for a transaction, or the speed and cost to liquidate a position, without knowing the volume profile of the underlying market. Many strategies, portfolios, and algorithms that price well on paper fail when the volume is entered into the equation.

Currency traders have devised some mechanisms to cope with the scarcity of reliable FX volume data. It’s possible to estimate FX transaction volumes using various proxies: currency futures, currency ETFs, short-term rate hedges like LIBOR futures, and so on. It’s also possible to gauge the “real” final demand for various currencies, based on trade patterns and balance of payments data. Central banks and public companies are obliged to publish their holdings and activities, albeit with a lag. Putting all these sources of information together, many currency traders have built their currency volume datasets.

Source: Quandl ─ Free & premium data provider - Hence, a little bit of bias article, but a good & simple reality check to read...


※ Volume in the Forex markets - useful or not? ※

As traders, we’re always looking for useful data that might give us an extra edge. That’s even truer for technical/price-focused traders where all we have is the open, high, low, and close of a market (or tick data, but that usually ends up in some similar transformation as OHLC data). Sure there are thousands of indicators but these are all just transformations of that price data.

Now in many markets volume can be a useful addition to that. Knowing if there was heavy trading within a certain time period or not can be valuable information. It can be used as a filter for trade signals, looking for strong volume on a breakout for example. But there’s also a couple of volume-based indicators that incorporate volume in a useful way.

In the futures markets, when you look at the volume you see how many contracts have been traded at the exchange during that time period. And you see all of it, of all market participants in that market as there’s just one exchange.

But Forex trading is decentralized, OTC trading. There is no single place to look at to see the actual volume of a currency pair. That’s why it’s often said that the volume provided by your broker is pretty useless. All you would see is the trading volume that happened at your broker, either between clients and liquidity providers in an ECN or if you’re trading at a market maker between your broker and it’s clients. But retail traders are not moving the markets, their volume is meaningless in such a big marketplace.

And of course, the institutional traders that are responsible for the volume that matters don’t trade at a retail broker. They’re on Reuters, EBS, or just trading directly with other banks/institutions. So if you just see the volume that happened at your retail broker, it’s useless information right? That’s what I thought too and so I never paid much attention to volume in FX.

Maybe it was time to have another look at volume data in the Forex markets and investigate the FX volume data provided by your broker/ECN might indeed be valuable information! <<< source: fxstreet
Since Frank Sinatra sings in his own way, my chart sing... I did it, my way
  • #7
  • Dec 21, 2022 8:44am Dec 21, 2022 8:44am
Why use Volume in trading?

Buyers don't generally push markets up and Sellers don't generally pull markets down, the other force is in control 90% of the time.
Liquidity Density is the primary factor in controlling market direction.

Our only tool we can use is to watch what effect market orders have on the market when they are executed.
Therefore - Success in volume trading is totally dependent on your ability to analyse the reaction to the market when the known size of Market Orders have just been Executed.
Trading thin liquidity at the boundary of the charts
  • #8
  • Dec 21, 2022 12:27pm Dec 21, 2022 12:27pm
Quoting TheCardinal
So.... is forex volume really reliable and accurate?
Forex has no volume data so zero data can't be reliable or accurate it just doesn't exist
Observer effect
  • #9
  • Dec 21, 2022 2:12pm Dec 21, 2022 2:12pm
Quoting RickM
Why use Volume in trading? Buyers don't generally push markets up and Sellers don't generally pull markets down, the other force is in control 90% of the time. Liquidity Density is the primary factor in controlling market direction. Our only tool we can use is to watch what effect market orders have on the market when they are executed. Therefore - Success in volume trading is totally dependent on your ability to analyse the reaction to the market when the known size of Market Orders have just been Executed.
This should be printed in stone - market orders push price only when liquidity allows.
  • #10
  • Dec 21, 2022 2:23pm Dec 21, 2022 2:23pm
You can't calculate volume from Forex Spot markets. You can calculate volume through FX Futures /6e,/6b,/6c etc.. the fx futures are the closest you'll get to volume at whatever time frame you prefer.
  • #11
  • Dec 21, 2022 3:09pm Dec 21, 2022 3:09pm
Quoting moen
You can't calculate volume from Forex Spot markets. You can calculate volume through FX Futures /6e,/6b,/6c etc.. the fx futures are the closest you'll get to volume at whatever time frame you prefer.
Yes

But only US Majors and US Indices, Metals etc.

Again, just because you see more buying volume doesn't mean shit - you need to see the reaction to liquidity to understand where direction is going.
But as a guide on EURUSD (6E), follow any volume over 250 contracts a minute and liquidity is at the mercy of Market Order Bias.

You have to get your head around the Futures Markets are less than 1/1000 the size of Currency markets, yet leads it by a split second.
Get your head around that one
Trading thin liquidity at the boundary of the charts
  • #12
  • Dec 21, 2022 5:06pm Dec 21, 2022 5:06pm
Quoting RickM
{quote} Yes But only US Majors and US Indices, Metals etc. Again, just because you see more buying volume doesn't mean shit - you need to see the reaction to liquidity to understand where direction is going. But as a guide on EURUSD (6E), follow any volume over 250 contracts a minute and liquidity is at the mercy of Market Order Bias. You have to get your head around the Futures Markets are less than 1/1000 the size of Currency markets, yet leads it by a split second. Get your head around that one ...
Order: Interbank > CME > data distrubutors (brokers) ?

Hence: CME > brokers ?
  • #13
  • Dec 21, 2022 9:39pm Dec 21, 2022 9:39pm
Quoting RickM
{quote} if you trade US majors, you can get accurate volume data by using a MT4 indy called CluserDelta. It’s data that comes directly from Futures markets of the CME exchange. The data is about 0.4 of a second ahead of forex and seems to show it proceeds the currency markets. You will learn that markets are controlled by HFT Algo’s to create a centralised environment that acts like one exchange. Don’t believe any Tick data study you read that states they are comparable to forex volume. Also don’t believe historical data coming from your broker...
So you would use futures volume to help you trade? You believe it displays an accurate picture of "real volume"?
  • #14
  • Dec 21, 2022 9:42pm Dec 21, 2022 9:42pm
Quoting v2vboni
... That’s what I thought too and so I never paid much attention to volume in FX. Maybe it was time to have another look at volume data in the Forex markets and investigate the FX volume data provided by your broker/ECN might indeed be valuable information! <<< source: fxstreet
So, are you using volume or not? The end of your comment is a little bit intriguing
  • #15
  • Edited Dec 22, 2022 12:17am Dec 21, 2022 11:37pm | Edited Dec 22, 2022 12:17am
Quoting hazelj80
{quote} I don't see how it would be useful because FX is off-exchange
They have you fooled, it actually works like a single exchange.

For example, if Gold on Future spikes in volume and moves bullish, all gold markets from every single broker will follow a split second later. Some may play games and do something different briefly but it will follow Futures Gold very quickly.
In other works, if someone buys 500 contracts on Gold that moves price up, the currency markets 1000 times bigger follows.

Really amazing

As another example - back in 2021 Gold spiked up 40 points in 4 second move and stayed there for a while. At the time I had the IC Markets Gold chart up as I was watching Futures and it wasn't moving. Now that's something I hadn't seen for months so I jumped in fast with a 2 lot size long trade and sat back. Within another two seconds, IC Markets Gold Market jumped up 40 points in three seconds flat giving me a nice $800 trade win (something around that) and a nice smile on my face. Normally you can't expect to see that happen but it's worth watching for.

So you can buy on Forex markets and hedge it on Futures.

BUT THATS NOT THE POINT OF THIS POST

IF Futures Volume shows STRONG market Buyers in volume, price will generally always rise. Therefore if you map the volume in Futures, you can trade forex and win 99% of every single trade you take. Sounds great but of course the markets won't give us a free meal so they may throw Buyers in to trap us in a position then SELL hard.

Knowing there are Buyers isn't a guarantee price will rise, all we know is volume is real and Buyers are doing their best to push price upwards.
Trading thin liquidity at the boundary of the charts
  • #16
  • Edited 2:45am Dec 22, 2022 2:25am | Edited 2:45am
Guys let's first check what volume is.

Volume
1 buy and 1 sell = 2, the volume is 2
10 buys and 1 sell = 11, volume is 11

Delta
1 buy and 1 sell = 0, the delta is 0
10 buys and 1 sell = 9, delta is 9

Now look what forex volume is. They are taking data feeds from several places, then average the results and then draw candles for you. No one cares what trades were made. There are no data about trades.

Why? Because forex broker has positive expectation against degen gambler trader. And no one give a f**k about all that fancy "volume", "trades". No one cares. They don't need it, because in general they will always win. Positive expectation is the key. Traders can't achieve it because of fees, fat fingers, connections issues, greed, fear, lack of knowledge and laziness.

So there are no volume data on forex.

But the good thing is that we know where they are taking the data from to draw us their fancy candles. It is CME for sure. Because we see that every price move on forex is just a copy-paste from CME with a few millisecond lag.

Every real market has 2 things: orderbook - the limit orders records and the orderflow - market order executions. Both doesn't exist of forex. Even if you see it - it is just a useless senseless flashing numbers.

So if you want to trade using volume data then you can analyze it using CME data. That easy in fact. Of course you can spend your time trying to analyze forex tick data, but this is very strange activity
Observer effect
  • #17
  • Edited 3:20am Dec 22, 2022 3:05am | Edited 3:20am
Quoting TheCardinal
{quote} So, are you using volume or not? The end of your comment is a little bit intriguing
Yes, I'm using it (gathering data/volume/contracts..etc)... Usually before the start of the week, it's part of my trading plan. Those CoT data and others that I can get from Quandl/CME data sources (free ones/or web sources, xml...etc) or reports are what I usually gather.

When I have this information, I analyze if it can provide timely information that I can incorporate into my own systematic system (at the moment under development/testing) so I can create a combination of confluences/setups and establish my own technical baseline bias before any type of price action appears on the chart. However, at the end of the day, it is me and me alone who can figure out what works and what doesn’t.

Since my chart only displays real-time data (tick/volume) from my Retail Broker's MT4 server (just a conduit for us retail traders). With technical tools, I can look at my chart and see if some light bulbs appear ; )- voila!

E.g.... Just for the remainder of this week till before new year... I expect EUR/USD price might play within range of 1.06000 estate.
Since Frank Sinatra sings in his own way, my chart sing... I did it, my way
  • #18
  • Dec 23, 2022 10:43am Dec 23, 2022 10:43am
Quoting ryuryu
But the good thing is that we know where they are taking the data from to draw us their fancy candles. It is CME for sure. Because we see that every price move on forex is just a copy-paste from CME with a few millisecond lag.
A few milliseconds is actually a long period of time. I used to trade over economic news using FIX API, while hooked up to multiple brokers (via cross connect) and news feeds simultaneously. Latency was the name of the game and I was forever trying to reduce it. If I could find a way to shave off a few microseconds when sending orders then I was happy, never mind milliseconds.

What you're describing sounds like an arbitrage opportunity waiting to be exploited or am I mistaken? I don't profess to being very knowledgeable when it comes to volume and futures.
  • #19
  • Dec 23, 2022 11:16am Dec 23, 2022 11:16am
Quoting Betchad
{quote} A few milliseconds is actually a long period of time. I used to trade over economic news using FIX API, while hooked up to multiple brokers (via cross connect) and news feeds simultaneously. Latency was the name of the game and I was forever trying to reduce it. If I could find a way to shave off a few microseconds when sending orders then I was happy, never mind milliseconds. What you're describing sounds like an arbitrage opportunity waiting to be exploited or am I mistaken? I don't profess to being very knowledgeable when it comes to...
Yes my first thought was the same: if I can catch it for arbitrage. But it happens rare. Always there are no lag at all, but sometimes we see the lag. Anyway I think this will not work. Too easy and too simple.
Observer effect
  • #20
  • Dec 23, 2022 11:28am Dec 23, 2022 11:28am
Quoting ryuryu
{quote} Yes my first thought was the same: if I can catch it for arbitrage. But it happens rare. Always there are no lag at all, but sometimes we see the lag. Anyway I think this will not work. Too easy and too simple.
Damn, I knew it was too good to be true. You got my hopes up as well and just before Christmas!

All joking aside, you and RickM have my thanks for your informative posts. It's refreshing to see there do exist people with logical brains on this forum and you've given me a rich area to explore. Cheers!
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