How to see Liquidity in market? | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Buyside and Sellside Liquidity Wicks and Liquidity Voids 761 replies

Power Of 3 Buyside Liquidity and Sellside Liquidity Wicks, FVG 108 replies

How do you see trading - Do you see it as a means to an end? 12 replies

Liquidity in the forex market 1 reply

see the ibfx post?access to all liquidity providers 18 replies

Attachments: How to see Liquidity in market?
Exit Attachments

How to see Liquidity in market?

  • #1
  • First Post: Mar 26, 2016 12:47pm Mar 26, 2016 12:47pm
Hi everyone!

Maby a weird question, but i read a lot about people who lost money because they opened (a stupid) trade when there was almost no liquidity (news, holidays etc.), so i was wondering is their a way to prevent this from happening, is their another way (except for watching the market) to see or know when NOT to open a trade because their is on that moment almost no liquidity?

Happy a great day!

Frank
  • #2
  • Mar 26, 2016 11:14pm Mar 26, 2016 11:14pm
FF News Calendar.
  • #3
  • Mar 26, 2016 11:46pm Mar 26, 2016 11:46pm
Quoting Ffl
Hi everyone! Maby a weird question, but i read a lot about people who lost money because they opened (a stupid) trade when there was almost no liquidity (news, holidays etc.), so i was wondering is their a way to prevent this from happening, is their another way (except for watching the market) to see or know when NOT to open a trade because their is on that moment almost no liquidity? Happy a great day! Frank
Volume is usually the best way if you are trading a fully transparent market like futures. FX gets a little tricky because it is decentralized and there is no central reporting or clearing to find the volume info. The only thing you can use as a proxy is tick volume. This is nothing more than a counter that tallies transactions but does NOT give you actual size of those transactions.

Typical low liquidity comes just prior to session opens or closes or during the "gap time" between sessions. But many other things can cause liquidity issues... Surprise news announcements which turn into "black swan event". Also any holiday in a given country or portion of the world can cause problems because the market in that portion of the world is closed even though your broker may be open.
@xxxx§|[::::::::::::::::>
  • #4
  • Mar 27, 2016 5:08am Mar 27, 2016 5:08am
Quoting Ffl
Hi everyone! Maby a weird question, but i read a lot about people who lost money because they opened (a stupid) trade when there was almost no liquidity (news, holidays etc.), so i was wondering is their a way to prevent this from happening, is their another way (except for watching the market) to see or know when NOT to open a trade because their is on that moment almost no liquidity? Happy a great day! Frank
First, figure out the world hours of when the banks that use the currencies you want to trade are open. Second, get a decent currency meter that will give you an idea of whether or not anyone has interest in either currency. Third, track the news releases for the day because sometimes there is a buildup and other times a patient wait. Good Luck.
You cannot be extraordinary by being normal
  • #5
  • Mar 27, 2016 9:30am Mar 27, 2016 9:30am
Avoid holidays and vacation seasons. Also try the following site for daily/hourly liquidity prediction:
https://www.mataf.net/en/forex/tools/volatility

Some people use indicator named Damiani Volameter for filtering. Personally I think that's crap but try it if you want....
Simplicity is the ultimate sophistication - Leonardo da Vinci
  • #6
  • Mar 27, 2016 9:44am Mar 27, 2016 9:44am
Long term liquidity shortage: bank holidays in most if not all relevant banking nations.
Short term liquidity shortage: during news (check a decent FX news calendar, the one here on FF is ok, I prefer the one from Fxpro though), start or end of the week.
You can also look out for frequent spikes or fishy behaviour of the spread like sudden increases.

To be pedantic though liquidity is overrated from a retail traders point of view, your chances to see any significant amount of slippage are most likely due to the price running away from you and not due to an actual problem in filling your order. While these two things are of course connected, the slowness of your platform and your chosen order types are usually more to blame.
  • #7
  • Mar 27, 2016 11:48am Mar 27, 2016 11:48am
Some of the big boys still in Easter holidays.

"Banks facilitate the majority of foreign exchange volume.
When they are closed the market is less liquid and speculators become a more dominant market influence.
This can lead to both abnormally low and abnormally high volatility"

http://www.forexfactory.com/calendar.php?day=mar28.2016
Attached Image
  • #8
  • Mar 27, 2016 5:56pm Mar 27, 2016 5:56pm
As a general rule the UK sessions is most liquid, followed by the US and then Asia.

Having said that, I did read a study done maybe 5 years ago from an FX broker where they found that their most profitable clients were those that were active during the Asian session.
  • #9
  • Mar 27, 2016 7:11pm Mar 27, 2016 7:11pm
I also had a similar question. I mean if the spot forex market is decentralized, where do the chart figures come from? I mean, if there is absolutely no way of telling how much forex is transacted daily, WHERE do the values of the real time price action come from? like this may not make sense to others but i have no other way of articulating what i mean..

With regards to equities, the marks are regulated and centralized through various exchanges, like the NYSE, NASDAQ etc... So there is an actual way of determining exactly how much shares are transacted daily. Therefore i fully understand where the chart values come from..

what about forex??

if someone could clear this up for me... i feel like i am missing a piece to the puzzle.
  • #10
  • Mar 27, 2016 7:13pm Mar 27, 2016 7:13pm
Quoting Mikado82
As a general rule the UK sessions is most liquid, followed by the US and then Asia. Having said that, I did read a study done maybe 5 years ago from an FX broker where they found that their most profitable clients were those that were active during the Asian session.
That study was from FXCM if I remember correctly and I believe it wasn't their most profitable clients but their share of clients who are profitable at all. The applicability of that information is highly dependent on your trading style.
  • #11
  • Mar 27, 2016 10:53pm Mar 27, 2016 10:53pm
Quoting youngcanada
I also had a similar question. I mean if the spot forex market is decentralized, where do the chart figures come from? I mean, if there is absolutely no way of telling how much forex is transacted daily, WHERE do the values of the real time price action come from? like this may not make sense to others but i have no other way of articulating what i mean.. With regards to equities, the marks are regulated and centralized through various exchanges, like the NYSE, NASDAQ etc... So there is an actual way of determining exactly how much shares are transacted...
Excellent questions but difficult to answer here in a few sentences. Most of the prices you see coming across your retail platform come from the liquidity provider for your broker. This is most likely a major bank like creditsuise or Lloyd's. These liquidity provider's process orders for their major clients and proceduces movement is a result of activity between the major banks. As most of these transactions are private their volumes are also private, but as it does register as a transaction a "tick" up or down will come across the platforms and thus your broker. But because most retail brokers have only one or two liquidity providers, quotes and therefore spreads are limited. Other smaller providers will also post bids and offers that come across level 2 platforms but most retail services don't show this.

Thus when you place your mini lot order it is so infantecimal it will never see the light of day on the market. Thus you broker becomes the counterparty to you order and it is filled "in house". The broker will continue collecting these orders until there is enough volume to lay off on the larger liquidity providers - banks. So if no one at these larger banks is willing to take the other side of the volume you broker is bidding (or offering) then they are stuck with it. And thus their cost goes up and the spreads will widen or the broker just won't complete your transaction until the liquidity returns - read banks are willing to be counterparts to the broker’s volume).

This is why during periods of low liquidity you retail broker will widen spreads (I've personally seen as much as 50 pips) or you order just won't get filled until it's too late.
@xxxx§|[::::::::::::::::>
  • #12
  • Mar 30, 2016 11:47pm Mar 30, 2016 11:47pm
To those who want the actual answer to these questions.. I would look up a subject called market micro-structure there are a couple of good books on the subject. The answer is too deep for a forum explanation but market depth which could probably be used interchangeably with the word liquidity is how much money is required to move the market by a certain amount generally 1 point this is going to vary so quickly from second to second that its pointless really to try to measure it... if you want to develop a feel for market depth try using an order book/ or what is sometimes called level 2 like the the guy above me said. Getting to the real heart of the issue trading in a time frame where you need to worry about this sort of thing is probably whats killing you... you should be trading in time frames where you can open trades while getting slipped something crazy and not worry about it... ill pay 45 points to hunt because i am hunting 2700 points long right tailed distribution trading patterns and consistently adjusting my risk to large time-frame volatility while normalizing my entry costs using a plateau based system over set number of entry trades while managing trades consistently building anchor points. Like all businesses focus on your price to transact, hunt for efficiency, get paid to hold your product, trade the larger time-frame, and enter with precision/ evaluating your positions at each target.
  • #13
  • Apr 23, 2016 4:42pm Apr 23, 2016 4:42pm
Quoting Ffl
Hi everyone! Maby a weird question, but i read a lot about people who lost money because they opened (a stupid) trade when there was almost no liquidity (news, holidays etc.), so i was wondering is their a way to prevent this from happening, is their another way (except for watching the market) to see or know when NOT to open a trade because their is on that moment almost no liquidity? Happy a great day! Frank
Well, no direct sources of information about liquidity in forex. But IMO, currency market its quite liquid nowadays even in Asian sessions, News and holidays, unless you're going to to trade with 30-100 lots position. My max trading size is 2-3 lots and slippage is quite rare, 0.5-2 pips max
  • #14
  • May 5, 2016 2:50am May 5, 2016 2:50am
Quoting heispark
Avoid holidays and vacation seasons. Also try the following site for daily/hourly liquidity prediction: https://www.mataf.net/en/forex/tools/volatility Some people use indicator named Damiani Volameter for filtering. Personally I think that's crap but try it if you want....
Yes and mostly the market went crazy while the holidays season and i guess you will find desperate traders only..
  • #15
  • Jan 8, 2018 11:19am Jan 8, 2018 11:19am
Quoting Ffl
Hi everyone! Maby a weird question, but i read a lot about people who lost money because they opened (a stupid) trade when there was almost no liquidity (news, holidays etc.), so i was wondering is their a way to prevent this from happening, is their another way (except for watching the market) to see or know when NOT to open a trade because their is on that moment almost no liquidity? Happy a great day! Frank
When aggressive candles are available in the higher time frames like H1, H4; that’s the most important sign to me about high liquidity!
  • #16
  • Dec 3, 2018 1:46am Dec 3, 2018 1:46am
it depends of what instruments you are trading, I guess. Liquidity and volume are two totally different things and for sure there is subordination with the part of the year for trading.
  • #17
  • Dec 3, 2018 1:18pm Dec 3, 2018 1:18pm
You can see Market Depth (it is too called Depth Of Market = DOM). There are volume of pending (LIMIT) orders.
  • #18
  • Dec 7, 2018 8:03am Dec 7, 2018 8:03am
Quoting jollypk
{quote} Yes and mostly the market went crazy while the holidays season and i guess you will find desperate traders only..
I avoid actively trading during the holidays for that same reason - the liquidity is low but the market goes crazy.
  • #19
  • Jan 11, 2019 1:24am Jan 11, 2019 1:24am
Keep in mind that most STP brokers does not have a Depth Of Market = DOM feature available in Live environment. Or in the best way, it is designed for the sole purposes of Real stocks trading only. Therefore, the volumes and prices of trade requests could be reviewed for these instruments only.
  • #20
  • Jan 12, 2019 11:15am Jan 12, 2019 11:15am
Best way to see liquidity in the market is looking at strength of a certain candle and how many pips it covered vs several small candles to determine where the market sentiment wants to move next

Best times to trade are London & NY overlap tons of big movements then
0 traders viewing now