Why doesn't volume work as an indicator in Forex? | Forex Factory

Options

Permalinks
Print Thread

Similar Threads

Why do indicators not work/work? Why is Forex not truly random? 129 replies

Why scalping doesn't work........ 82 replies

why curve fitting doesn't work? 23 replies

So simple... Why doesn't it work 20 replies

Why doesn't it work more recently? 17 replies

Attachments: Why doesn't volume work as an indicator in Forex?
Exit Attachments

Why doesn't volume work as an indicator in Forex?

  • #1
  • First Post: Jul 30, 2007 11:36am Jul 30, 2007 11:36am
I have read that the forex doesn't have any accurate market-wide volume statistics and one should stay away from any indicator that uses volume. I know that sounds obvious. But many charting packages include volume (just from their clients' orders) and also include volume indicators.

Why doesn't volume work and what other alternatives do we have to study market behaviour in terms of volume?
  • #2
  • Jul 30, 2007 11:41am Jul 30, 2007 11:41am
Quoting Porkpie
I have read that the forex doesn't have any accurate market-wide volume statistics and one should stay away from any indicator that uses volume. I know that sounds obvious. But many charting packages include volume (just from their clients' orders) and also include volume indicators.

Why doesn't volume work and what other alternatives do we have to study market behaviour in terms of volume?
Watching the market realtime and gauging the movements yourself, preferably on several broker data streams.
Virtue finds and chooses the mean. Aristotle, Ethica Nichomachea
  • #3
  • Jul 30, 2007 11:42am Jul 30, 2007 11:42am
Quoting Porkpie
I have read that the forex doesn't have any accurate market-wide volume statistics and one should stay away from any indicator that uses volume. I know that sounds obvious. But many charting packages include volume (just from their clients' orders) and also include volume indicators.

Why doesn't volume work and what other alternatives do we have to study market behaviour in terms of volume?
you can try using Commitment of Traders report. It deals with futures but the forex spot market follows it to some degree. You can guage buyers and sellers sentiment by the amount of open interest they have..but it's more to this though
  • #4
  • Jul 30, 2007 11:44am Jul 30, 2007 11:44am
you could use level II, that's a form of volume also I guess
  • #5
  • Jul 30, 2007 11:44am Jul 30, 2007 11:44am
The volume in Forex is listed as tick volume not actual order flow. So, it can be misleading... However, there are many good uses of tick volume. You can get a general idea of the participation of a move by looking at the tick volume.. Any kind of on balance indicator would not be correct. because of the lack of order size info.

There is a thread by FXorce about news events, using tick volume and it looks to be very interesting.

I think it is in the News Trading Room Forum.
http://www.forexfactory.com/showthread.php?t=37926
  • #6
  • Jul 30, 2007 12:49pm Jul 30, 2007 12:49pm
Quoting Porkpie
Why doesn't volume work ?
I'll let others answer the other stuff, but for this question the answer is because it is essentially an international open barter market between individuals, so the sort of centralized record-keeping & regulation that govern markets such as stocks is not feasible. It's also not been considered necessary, because until recently FX markets were closed to less experienced investors.

It's useful to get a handle on the history and structure of the market; I recommend Cornelius Lucas' book "Trading on the Global Currency Markets" for that (I don't know if it's been updated since my edition was printed in Y2K, so it may be a little dated, but it's still useful)
  • #7
  • Jul 30, 2007 1:06pm Jul 30, 2007 1:06pm
That's right. A stock is traded in only one place, or a very limited number of places on the planet. So the volume is known.

Individual banks can be trading billions and there's no reporting of how much volume is being traded. There's no centralized "exchange".
  • #8
  • Jul 30, 2007 3:14pm Jul 30, 2007 3:14pm
Quoting hilmy83
you can try using Commitment of Traders report. It deals with futures but the forex spot market follows it to some degree. You can guage buyers and sellers sentiment by the amount of open interest they have..but it's more to this though
where can this report be found?
  • #9
  • Jul 30, 2007 3:18pm Jul 30, 2007 3:18pm
Quoting Mr chips
where can this report be found?
http://www.freecotcharts.com/charts.htm

refering to the original question "Why doesn't volume work as an indicator in Forex?"my opinnion because volume is related only to broker-volume, not to the hole market, after all forex is decentralized market
"Abandon all hope, you who enter here" La Divina Commedia, Dante Alighieri
  • #10
  • Jul 30, 2007 4:36pm Jul 30, 2007 4:36pm
Thanks all.

I am particularly interested in ways of analyzing market behaviour. A volume indicator can be useful for this purpose in other markets. I will follow up that article, thanks smjones, the tick by tick data should be interesting and might be of some worth.
  • #11
  • Aug 9, 2008 12:47pm Aug 9, 2008 12:47pm
This link may be helpful... it is broker specific, but does give one an idea of sentiment...
Attached Image (click to enlarge)
Click to Enlarge Name: ScreenHunter_01 Aug. 09 13.44.gif Size: 30 KB
  • #12
  • Aug 10, 2008 8:12pm Aug 10, 2008 8:12pm
Quoting semar
volume is related only to broker-volume, not to the hole market
That is right.

Volume can be used effectively if your broker has many good traders. If you're using some Syrian unregulated broker with 500 clients, it would not be as reliable.
  • #13
  • Sep 24, 2008 1:55am Sep 24, 2008 1:55am
Quoting Porkpie
I have read that the forex doesn't have any accurate market-wide volume statistics and one should stay away from any indicator that uses volume. I know that sounds obvious. But many charting packages include volume (just from their clients' orders) and also include volume indicators.

Why doesn't volume work and what other alternatives do we have to study market behaviour in terms of volume?

actualy eSignal tracks 308 major banks and brokers to produce reliable volume in Forex. if somebody don't believe that volume can be used to beat banks and professionals at their own game, check this thread: http://www.forexfactory.com/showthread.php?t=105655
  • #14
  • Dec 3, 2008 4:38pm Dec 3, 2008 4:38pm
TRY This Link:
http://www.forexfactory.com/showthread.php?t=132537
OTR
  • #15
  • Last Post: Dec 3, 2008 5:37pm Dec 3, 2008 5:37pm
Quoting Porkpie
I have read that the forex doesn't have any accurate market-wide volume statistics and one should stay away from any indicator that uses volume. I know that sounds obvious. But many charting packages include volume (just from their clients' orders) and also include volume indicators.

Why doesn't volume work and what other alternatives do we have to study market behaviour in terms of volume?

the volume indicator just shows how many trades were opened through that specific broker, not through other brokers or banks or institutional traders. how are you supposed to know about volume throughout the whole market when you can only get a minute sliver? plus, volume indicators only show the number of trades, not how much money is actually in the market.
0 traders viewing now