What's Volume Data?

So I've just been in a painfully long discussion with OANDA live support trying to establish what the volume data they provide means, and I'm still a little lost.

Traditionally market volume would indicate how many buy/sell orders were flowing the market, right?

But with MM and Forex that's not as useful considering there's not a single exchange, and hence not a single snapshot of 'the market'.

Other SB providers have said what they provide instead is 'price update volume' which represents how often prices are being updated from their liquidity provider(s), which at least gives an indication of market activity.

What's the deal? Is each broker different? What does volume data actually represent when you're talking about a MM/SB broker?

Cheers guys

First, a correction. Traditional volume, as you call it, is not a measure or orders but rather a measure of shares/contracts. The difference is that one order can account for any number of shares or contracts.

Second, "price update volume" has long been the standard volume indication in the retail forex market across nearly all platforms. We may eventually get to the point of them sharing traditional volume, but we're not there yet.

Rhody Trader said:

First, a correction. Traditional volume, as you call it, is not a measure or orders but rather a measure of shares/contracts. The difference is that one order can account for any number of shares or contracts.

Second, "price update volume" has long been the standard volume indication in the retail forex market across nearly all platforms. We may eventually get to the point of them sharing traditional volume, but we're not there yet.

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Ah, got ya. So am I right in thinking that from 'price update volume' we can only really see how much activity is in the market, not much else?

Many thanks for the correction and info.

Price upate volume (also referred to as tick volume) only tells you how many times the price quotes have changed, nothing more.

Rhody Trader said:

Price upate volume (also referred to as tick volume) only tells you how many times the price quotes have changed, nothing more.

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Can that itself not tell you something about the market, or are you saying it's entirely useless?

I had assumed that the more frequent the price updates, the more participants there were changing those prices – so a measure of strength if there was an active trend or potential volatility in a sideways market?

You could argue either way. On the one hand, how much does it matter if the EUR/USD bid goes from 1.4003 to 1.4004 and back again? That's going to count as two for the tick volume count, though. On the other hand, folks have apparently done work which suggests no real difference between tick and actual volume distributions.

Rhody Trader said:

You could argue either way. On the one hand, how much does it matter if the EUR/USD bid goes from 1.4003 to 1.4004 and back again? That's going to count as two for the tick volume count, though. On the other hand, folks have apparently done work which suggests no real difference between tick and actual volume distributions.

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John, thanks – I appreciate the help. It can be a challenge wrapping your head around what all this data means together

martinrue said:

John, thanks – I appreciate the help. It can be a challenge wrapping your head around what all this data means together

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Its only an indication. The higher the voulme, the higher the times the price has changed, nobody can tell you, at a specific moment, the real absolute volume that is beeing traded.

Set up demo account on the 'real' amount of money you expect to invest. If it's 5k, 20k, 50k or whatever then just set the demo amount for this. Make it realistic. A 1.0 Mio US$ account isn't realistic to start with.