How do brokers work out the Volume for FX?

[Rossini]

There can be no Volume for Fx, so how does a retail broker show this? Is it just the amount of Volume that the broker had traded over any given period?

Cheers

 

[gc1]

I think you will find the fx marketmaker's charts just show the number of their price changes per bar as the "volume". It's a very rough analog for the rate of market activity (but probably not a good one).

 

[Rossini]

So in affect its just a form of a tick chart?

 

[Rhody Trader]

There can be no Volume for Fx, so how does a retail broker show this? Is it just the amount of Volume that the broker had traded over any given period?

A broker could show volume through their platform, but you probably won't see that very much. They tend to horde that information. What you see is tick volume, which generally represents the number of times the price was quoted at a certain level.

 

[N Rothschild]

if you look at currency futures it will show you volume and give you an indication of whats going on, but thats not spot forex

 

[Rossini]

if you look at currency futures it will show you volume and give you an indication of whats going on, but thats not spot forex

I didnt know that, interesting..

 

[Ferru]

Interesting.

How would you use this information to your advantage?

Regards

Jeff

A broker could show volume through their platform, but you probably won't see that very much. They tend to horde that information. What you see is tick volume, which generally represents the number of times the price was quoted at a certain level.

 

[MrGecko]

A few pointers:

Spot volume is proprietary information, you are wholly unlikely to get your hands on it for free.

Tick volume it a total joke. A change of 5 pips from one contributory price feed may result in 40 or more "price changes" as the domino effect continues down the line... ergo one desk changing their price by 5 pips results in a "tick volume" of 45 - 5 done by a small proportion of the market (one desk!), 40 done by computer.

Futures volume (as with exchange options) are a poor proxy for the spot / forward market.

The best way (IMHO) to use this information is to ignore it.

EDIT: Even if you did have it, there are still the option / forward / swap contingents of the market to consider...

 

[nine]

Agreed with MrGecko,

In general, ignore it.

If you have traded with volume on stocks you will be aware of the fuzziness of any guidance it gives you. In futures it is worse because the markets is often the tail on the dog (the sum of the stock markets) so the underlying theories of volume (Wyckoff, VSA etc) are frequently invalidated. In forex it becomes totally misleading because:
- its not volume, its just some inaccurate version of a tick count
- theories of accumulation etc were developed for the stock market and many elements will not apply to futures.

If you were in a position to understand the information you see and were able to determine that it did have some reliable probabilistic predictive relationship to following price movement then it would be worth considering what you see. But you need to:
- understand the source and its relationship to the broader market
- develop theories of predictability and then test them; before
- developing a potential edge and testing its statistical performance vs the equivalent edge w/o "volume."

Personally, being unwilling to spend the big bucks required to get meaningful data, my choice is to ignore it and trade the excellent price patterns that forex sets up.

 

[Rossini]

I wasn't planning on using it, but I just happened to come across it and was curious.

Thanks