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0<\/strong> Flares<\/span><\/p>\n Volume figures in Forex represent how much of a currency has been traded over a particular time period. Some traders might simply look at this number and think \u2018Oh, it\u2019s a busy day!\u2019, whilst other more experienced traders will be able to correlate volume with prices, better understand sentiment trends and create actionable steps for their trading decisions. These are what we call Volume Trading Strategies and will form a large part of this in-depth guide.<\/span><\/p>\n Yes and No. Volume data on a single exchange should always be accurate, but Forex does not work on a single exchange, it is decentralized. With no primary exchange in place to save all transaction data on a single ledger, the data regarding currency trades in a given time period is simply not exact. How close is it? And How much does it vary between broker platforms? That\u2019s hard to say, as it\u2019s constantly changing. By the time you read data, it\u2019s already out of date.<\/span><\/p>\n Due to the lack of consistency in trading volume information, many advanced traders in fact tend to completely overlook this figure and opt for other strategies where the data is more precise. Despite their choice to ignore volume and seek trading strategies in other places, it does remain possible to have a successful volume trading strategy, or at least consider volume as a factor in other strategies.<\/span><\/p>\n Volume is affected primarily by macroeconomic events, such as fiscal or geopolitical happenings that impact national and regional economies. However, this is not the only factor.<\/span><\/p>\n Some other factors that affect Volume include:\u00a0<\/strong><\/span><\/p>\n Forex (FX) volume refers directly to the number of lots<\/strong> traded in a currency pair<\/strong> in a specified time period<\/strong>. This time period could be a day, month, year, or literally any time period that you define. Most brokers will have a flexible interface that lets you choose the \u2018when\u2019 of the available trading data. In the most basic sense, trading volume in forex is the amount of currency being bought and sold.<\/span><\/p>\n Many brokerages display volume data as a technical indicator<\/a> capable of providing a useful perspective of market activity and ongoing trends. It is used by many as a decision-making tool for buying or selling foreign currencies.<\/span><\/p>\n Trends can come in different forms, but they typically refer to the upward or downward momentum of a market\u2019s price or volume, as opposed to a stable period. Volume data that is higher or lower than normal tends to indicate prolonged activity or an impending end to the trend. It can also give those with a keen eye, good insight into when to execute their trades, as volume patterns can be found within the data.<\/span><\/p>\n Beyond showing the number of lots and for understanding market trends, the Volume indicator can confirm (or provide non-confirmation) for reversals. Confirming a reversal is often done by seeing high selling volume at a resistance level, and a break in the resistance is shown by low selling volume. Some traders observe the volume data to see whether a support barrier has been reached or a break in the level of support has occurred, shown by high buying volume and low buying volume respectively.<\/span><\/p>\n For inexperienced Forex traders, this point may seem a bit confusing, so let\u2019s break down what high volume and low volume show us. It will certainly help.<\/span><\/p>\n High volume equals a busy marketplace. When the volume is high, there are lots of traders opening positions and thus creating momentum<\/a>.<\/span><\/p>\n In general, it can be said that high trading volume for purchases of a foreign currency relates to the market price moving in the same direction. Equally, a high volume of sellers relates to the price going down. It isn\u2019t an exact science, but it\u2019s accurate in many cases.<\/span><\/p>\n What else can high volume show us?<\/span><\/p>\n For many traders who open and close a large number of trading positions, high volume typically equates to high liquidity. Liquidity<\/a> refers to the number of people in the market willing to buy\u00a0 and sell assets, allowing traders to close their positions very fast. High volume and high liquidity also create tighter spreads, which means your trades go through more effectively.<\/span><\/p>\n High trading volume has several benefits, but there are by-products too, deemed negative. The price changes rapidly when there are lots of buyers and sellers active in a marketplace. There is a good way to counter volatility, called tick volume. We\u2019ll cover this in a later section.<\/span><\/p>\n Unlike high volume, low volume means there are fewer buyers and sellers and less liquidity. For most FX traders, low liquidity is a nightmare, as it means risking getting stuck in a position and possibly taking bigger losses than anticipated. It also means wider bid ask spreads<\/a> which can add to the transaction costs.<\/span><\/p>\n High and low volumes can reveal a great deal of useful information, as we have seen, but there\u2019s plenty more that can be gleaned from this figure.<\/span><\/p>\n Both distribution and accumulation are easily calculable:<\/span><\/p>\n AD<\/strong> = ((Closing Price \u2013 Opening Price) \/ (High Price \u2013 Low Price)) X Volume<\/span><\/p>\n Compare the result over two days. If the figure falls, it shows the currency\u2019s distribution. If the figure increases, it shows the currency\u2019s accumulation.<\/span><\/p>\n A tick, in trading markets, such as stocks, futures, or Forex, is the smallest increment by which these trading instruments can move.<\/span><\/p>\n Another way of describing a tick is as a single change in the currency price quote in either direction. One trade is one tick, so if you see a significant change in the tick volume in a short space of time, it means there are lots of positions being opened and closed.<\/span><\/p>\n The math here is very straightforward, but you will require an Intraday Chart<\/a>. Choose your desired time period, such as 10 minutes, and then count the number of ticks during that time period in the Intraday chart.<\/span><\/p>\n What is the Difference Between Tick Volume and Trading Volume?<\/span><\/p>\n Both are useful metrics for traders and typically they have a high positive correlation of up to about 90%.<\/span><\/p>\n Another way to see these two metrics would be to imagine you\u2019re the owner of a shop. Your shop makes 100 sales (ticks) on Saturday for $1,000 (volume), and 200 sales on Sunday for $1800. You can see that the higher the number of sales, typically the higher the volume of sales too, and whilst the data correlates, it is not exact.<\/span><\/p>\n Let\u2019s get right to it. There are TWELVE ways to calculate volume<\/strong> in Forex Trading (FX).<\/span><\/p>\n This list is in no particular order, but it does raise the question\u2026<\/span><\/p>\n Some say Chaikin, some say VZO, and others swear by MFI and VWAP. In truth, it\u2019s completely subjective. You should try as many as you feel comfortable with, research strategies as you go, and find which one brings you the best results.<\/span><\/p>\n The twelve indicators we listed offer different functions and benefits, which can be incredibly useful for your trading strategy, or utterly useless. That\u2019s for you to discover. At least, here is what they aim to do.<\/span><\/p>\n How is Trading Volume Visually Represented?<\/span><\/p>\n If we remember that a tick is a single change in price from a single trade, and that volume is the amount of money that changes hands between traders in total, then we need to know how it is displayed.<\/span><\/p>\n In Forex trading, the trading volume is represented in green and red bar charts. Green = more trades in the time period. Red \u2013 fewer trades in the time period.<\/span><\/p>\n Volume analysis is a great way to identify big money movements, which are typically the result of actions from businesses, banks, hedge funds, brokerages, insurance companies, and other institutional-sized investors. If you see where the big players put their money, you can follow suit and get in on the action.<\/span><\/p>\n When the big players start opening positions, something called \u2018directional bias\u2019 begins, the price continues to move towards desired levels and tick volumes increase. This brings traders closer to a selling decision. Just remember, when a big player makes a move, it can have a huge effect on price and trend.<\/span><\/p>\n When you make your first trades, it\u2019s a nervous affair. You\u2019re not sure your analysis is effective, and you might even feel like you\u2019re guessing. You might be just following the advice of friends. Whatever it may be, it\u2019s simply a starting point, and getting started is a good thing. We learn more from mistakes than from successes, just make sure to only lose small amounts.<\/span><\/p>\n In Forex, like other trading markets, someone has to lose for somebody to win. Of course, you want to be on the winning side, and whilst you don\u2019t have the power to affect the markets, you can learn trading volume analysis to mirror those who do. Big players have well-paid market professionals<\/a> who do understand the markets and make trading decisions with that knowledge, for a living. The role of volume in Forex trading, then, in a sense, is to be able to follow the institutions, and leverage what you know for profit.<\/span><\/p>\n This article was written by Roberto Rivero. He is a financial writer with Admiral Markets<\/a> London. Robert has a BSc in Economics and an MBA. He has been an active investor since the mid-1990s. He has spent 11 years designing trading systems for traders and fund managers.<\/span><\/p>\n
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\n <\/span>\n<\/div>\nIs Volume Data Accurate?<\/span><\/h3>\n
What Affects Forex Volume?<\/span><\/h3>\n
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![\"fx-market-volume\"](\"https:\/\/forextraininggroup.com\/wp-content\/uploads\/2022\/03\/fx-market-volume-300x251.png\")
<\/a>What is the Role of Trading Volume in Forex Trading?<\/span><\/h3>\nWhat Does High Volume Show Us?<\/span><\/h3>\n
What Does Low Volume Show Us?<\/span><\/h3>\n
What Else Can Volume Show Us?<\/span><\/h3>\n
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What is a \u2018Tick\u2019?<\/span><\/h3>\n
Calculating Tick Volume<\/span><\/h3>\n
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How to Calculate Volume in Forex Trading?<\/span><\/h3>\n
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What is the Best Indicator of Volume?<\/span><\/h3>\n
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<\/a>How to Use Volume Indicators in Forex Trading<\/span><\/h3>\n\n
Forex Volumes and Big Players \u2013 Institutional-Sized Movement<\/span><\/h3>\n
Conclusion: Trading Volume Analysis \u2013 A Way to Play Like the Big Boys<\/span><\/h3>\n
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