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Volume Analysis & the forex trader?

  • #1
  • First Post: Jul 26, 2012 12:28pm Jul 26, 2012 12:28pm
Is Volume Analysis Valuable to the FOREX Trader?
  • #2
  • Jul 26, 2012 1:17pm Jul 26, 2012 1:17pm
Quoting gregp
Is Volume Analysis Valuable to the FOREX Trader?
Yes it is!

Ok , ok. Volume in Fx isnt quite reliable as volume on an actual exchange
But Volume by all means just represents activity! Tick movements in fx equals activity

Just keep in mind that volume= activity. And you are all good

Just look at the recent action on atypical fx broker and compare it with LMAX wich is an exhange and compare that to futures market and u will see
That there isnt such a big difference in volume

Yes one bar might be bigger or lower then the other but compared to the broker
Or exchange its the same. Ie the bar might be smaller on your broker compared to an exhange ,but its still the biggest bar in your volume profile just as on the exchange

Again volume= activity
  • #3
  • Jul 26, 2012 1:51pm Jul 26, 2012 1:51pm
What I'm wondering is this: if LMAX is an exchange of its own, how come its prices are almost identical with those of FXCM, FXDD and such? A centralized exchange place should have nothing to do with another exchange place, right? There are stocks for the same company that trade on different stock exchanges and the prices are different. Isn't it how it should be?
Trax Tibidax Tibidox...
  • #4
  • Jul 26, 2012 2:51pm Jul 26, 2012 2:51pm
Quoting masterpiecefx
What I'm wondering is this: if LMAX is an exchange of its own, how come its prices are almost identical with those of FXCM, FXDD and such? A centralized exchange place should have nothing to do with another exchange place, right? There are stocks for the same company that trade on different stock exchanges and the prices are different. Isn't it how it should be?
U cant trade the same stock on different exchanges!
Stocks are listed in one or the other xchange not at multiple markets

And prices do differ! But only within the lower pip and tick range

Despite that , i guess it has something to do with self organization phenomena

Also remember that the biggest liquidity providers of lmax are institutional banks
  • #5
  • Jul 26, 2012 3:23pm Jul 26, 2012 3:23pm
Quoting masterpiecefx
What I'm wondering is this: if LMAX is an exchange of its own, how come its prices are almost identical with those of FXCM, FXDD and such? A centralized exchange place should have nothing to do with another exchange place, right? There are stocks for the same company that trade on different stock exchanges and the prices are different. Isn't it how it should be?
Because of market efficiency. They do all have different prices but either you arb someone and make cash or someone arb's you.
  • #6
  • Jul 26, 2012 3:24pm Jul 26, 2012 3:24pm
Aeiou, some stocks are traded on different exchanges. Quick ie that comes to mind is Royal Bankd of Canada, which is traded on NYSE and TSX. Two different exchanges, two different prices. There should be no phenomena. If the market is centralized, then it has its own demand and supply, and thus, its own price for a given instrument. But this is just my imho, just a general wondering. Thanks for the reply.
Trax Tibidax Tibidox...
  • #7
  • Jul 26, 2012 6:48pm Jul 26, 2012 6:48pm
IMO, there is no value to volume in spot forex. You will see the same patterns every time at the exact same hours. Activity increases during UK and US sessions.

Just measuring the number of times a tick changes is not as informative as measuring the number of contract/lot exchanged hands.

For example (using imaginary numbers)
-I could spend 1 million to move the markets 100 ticks. This is registered as 100 vol in forex. But to do this, I might have just completed maybe 15lot worth of transactions. Maybe markets were thin so a small change in orders could move the markets lots. Does this mean that there was heavy activity during this period? The answer is "Not at all". But price did move a lot and you probably got a nice long bar on your volume indicator.

-On real volume however, this will probably register as a measly number of 15. Since volume as we all know it in other markets represent the number of contracts exchanging hands.
  • #8
  • Jul 26, 2012 6:57pm Jul 26, 2012 6:57pm
I'd like to add:

The reason why forex is probably the hardest instrument to trade in all financial markets is because you lack information. The spot forex market is a huge vacuum and only the really rich can afford information.

Most of the time you are trading blind. The only reliable thing in forex is price action.

Stocks, futures, options all have tracked information such as volume, open interests, up vol, down vol, vix, tix, trin and a whole lot of other market internal tracking indicators. These give 3 dimensional view into market internals.

With these you can obtain a high accuracy calling the next move. You can probably even tell if this move is profit taking or fresh buying/selling. You can determine if this market is going to break out or fakeout.
  • #9
  • Jul 29, 2012 7:37am Jul 29, 2012 7:37am
The On Balance Volume (OBV) indicator has been around for a long time. It was introduced in 1963 as a way to measure positive and negative money flow into securities. The concept behind its usefulness is that “volume precedes price” and therefore an understanding of volume is crucial to understanding the direction of price.
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  • #10
  • Mar 23, 2016 4:37am Mar 23, 2016 4:37am
Quoting thelws
I'd like to add: The reason why forex is probably the hardest instrument to trade in all financial markets is because you lack information. The spot forex market is a huge vacuum and only the really rich can afford information. Most of the time you are trading blind. The only reliable thing in forex is price action. Stocks, futures, options all have tracked information such as volume, open interests, up vol, down vol, vix, tix, trin and a whole lot of other market internal tracking indicators. These give 3 dimensional...
Absolutely I agree
  • #11
  • Last Post: Mar 23, 2016 8:41am Mar 23, 2016 8:41am
There is no volume in forex so the idea of volume analysis just is ridiculous,
all there is are ticks, 1 tick = 1 trade, it can be 1 lot or 4000 lots, who knows?
if anyone can get any useful information regarding volume from that, I got to give it to them,
and thats not all, the ticks "only" comes from your broker,
so you have no clue whats going on in the complete market.
Bulls are stupid Animals!especially when Im short!
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