Forex volume

[jezza888]

Curiosity etching away at me....

Foreign exchange has no global exchange and therefore no accurate volume can be measured.

This chart from Metatrader4 using Interbank feed shows volume.

Both the break to new highs and NFP show surges in volume.

Where does it come from? Is it a relation to 'Interbanks' volumes alone? Is it meaningless and just rises because, obviously, volume would increase around these times? If it is completely meaningless, why do they have it?

Can something really be derived from one feeds volume analysis alone or should it be plunged into the depths and forgotten forever?

 

[gc1]

"Volume" on these charts is just the number of different price quotes or "ticks".

So it is pretty meaningless - but does increase during periods of greater market activity.

 

[charliechan]

Actually a surprisingly small amount of business went through the inter-bank market on Friday (at least according to a few banks I spoke to). This is the case on NFP day more often than you would intuitively think. I didn't speak to anyone on Friday who said they had a lot to do.

.....

GJ

no wonder! all the action was over in 5 mins. the rest was just churn. not like last months number that gave a sustained trend throughout most of the day. (talking eurofx (eur/usd) futures - but guess the cash isnt a 1000000 miles off)

 

[jezza888]

Where/who do you work for Gamma Jammer? If you don't mind me asking?

 

[jezza888]

I don't mind you asking at all, but I'm afraid I'm not going to tell you. I work as a trader for a large shop, but that's all I really want to reveal. Sorry mate, nothing personal.

GJ

Fair enough, no problem, cheers

 

[charliechan]

......

Because it's generated off the number of price updates, if anything one could almost argue the case that large volume on these charts = low volume in reality, as the deeper the available liquidity on the bid and offer, the more it will take to move the price, and therefore the less often that price will update. But in actual fact I just think it's all a load of tosh ;-)

GJ

thats an interesting point. looking at 2 index futures - e-mini s&p and the e-mini russell 2000, the tick volumes (number of trades) are about the same on an intraday chart, but the contract volumes traded on the s&p is about 5x that of the russell. depth on the s&p is typically > 5x that of the russell with ease - backing up your point.

the interesting thing though is the depth in trends. often the size will increase against the trend rather than decrease. of course, much of that will disappear as soon as the price trades, so not much of it is 'real'. i see this in all markets - not just fx futures, but also index etc...

although to play devils advocate, looking at bp or the swiss franc against the euro, both have low tick volumes and contract volumes to the euro. (interesting sidepoint being bp. it has a low tick value - reflected in the underlying value (about $62500 i think) compared to the swiss and euro. given this, i thought twice as much volume should go through to put it on a par with say the swiss)

sorry if that doesnt make much sense - but im in a hurry......

 

[charliechan]

doh!

what i am trying to spit out is that i would have thought bp would have had roughly the same dollar values as say the swiss in terms of $ turnover (volumes). maybe it doesnt! seeing as bp/usd is considered as a major pair/cross by you fx dudes, i thought it would have had a great deal more size shown to match liquidity than it actually does in the futures market - especially as it is effectively half the size as the others. (if i want $1m in swiss, i think i need 8 contracts. if i want $1m in bp, i need 16 contracts). as futures volumes for bp and swiss are roughly the same, this means that half the $ business is done in bp than the swiss due to the contract size. does this seem true compared to the cash?

i must say that most of the traditional volume analysis one reads about (divergences with price etc) seem to work just as well with tick volume as contract/unit volume

 

[jiggly]

contract volume and tick volume both share a common relationship, both are a measure of activity..

the actual contract traded amount and precise tick frequency readings have little purpose to a trader, the market pauses, sways and rockets at different intensities.

when you use both types of volume readings in relation to the volume activity before it and correlate this to the price, maybe you might be able to extract some usesful information.

best regards

 

[gabroo_munda]

Hi jezza888,
i am new at this forex trading. i just wanted to know....what moving averages did u use...on the chart u posted? thank you very much.

regards

 

[THE FxORCE]

GBPUSD nearly perfect proxy for EURUSD????
Check out the EURGBP chart and get back to me. Cross hedge GBPUSD with EURUSD and let me know how your account goes.
I know I'm new here but I feel it's my responsibility to assist legitimate questions on the internet and remove disinformation as soon as possible. Knowledge is power and any time there is an imbalance of those who have knowledge vs those who do not there is a profitable exploitation taking place. Sorry to grandstand.
Regarding MT4 volume. Yes it is tick volume. MT4 volume histogram does not paint a true volume picture but I'm willing to prove to you that it's very close to real volume on Globex currency futures. I did a case study using Investor R/T charting from Lynnsoft with DTN.IQ data from the exchange and compared to MT4 volume from ODL. Greater than 90% of the time the spikes in volume were on a ratio accurately analogous between the two platforms. I posted the study at forexfactory under my same screen name there.
One last point needs to be made. Any market moves on fear and greed. (on a sidenote the only two basic emotions we experience are fear and love. all others are derivative.) When price is moving quickly in one direction; let's say up that means there is fear in the market. Two things are happening. #1 There are traders very sure the market is going to continue to rise so they "hit the offer" or "lift the offer". #2 There are traders panicking getting their stops hit or run or simply are offsetting at next available prices which is essentially also hitting the offer but it's in a different emotion. Your largest volume spikes everyday in forex are no doubt the macro economic news events when there is plenty of panic in the market and prices gap 10-30 pips in seconds.
Since this is my first post here I'll take a minute to introduce myself. I'm a CTA from Nebraska. I know my sh1t. I manage funds from home. All the ex. good dealing desk traders I've talked to manage personal prop and managed funds from home. The biggest traders UBS employs trade from a yacht off the Caymans. UBS has to fund their lifestyle if they want to keep those guys.

 

[THE FxORCE]

Terribly sorry this thread still comes up in a search as it's still active on the internet. I'll remove my username from this board. I didn't know this was an all ego board. Comments made were not completely directed at you, but if you want to defend subprime credit crisis then look back to 2001 or back to JPY currency crisis. It happens often. Volatility was at historic lows during the time of that post. I apologize for not dating my post in accordance.
Have a good day, Mate.
Now I know why you don't work for yourself. You can only work for yourself when you have no ego. Having an ego costs a ton of money. All newbies read and beware.