Trading volume on Forex

You already know quite a lot about trading rules and observe them. You know that you should rein in your emotions. You even learnt how to manage your funds. So, you stick to all key trading principles, but still incur losses. Do you think that you miss something out? In fact, you do.

You miss out such an important aspect as trading volume. Probably, you have heard about volume in the stock or futures markets. It shows how many stocks or futures contracts were sold and bought during a trading day. In other words, it shows an intraday turnover.

Is it crucial to know trading volume?

Yes, it is. If you keep track of trading volume, you can analyze the market situation and discover the current tendencies. This way, you can be aware of actions of professional traders who influence the market. If you want to make money on Forex, but not just trade idly, you need to follow big players and copy their actions at certain periods of time.

Trading volume on Forex can be defined by Volume Spread of Analysis (VSA). It is a method for analyzing changes in trading volume. VSA shows arelationship between volume and a size and shape of candlesticks.

Where to monitor trading volume?

It is impossible to find out the exact amount of currencies sold or bought on Forex for two reasons. First, the foreign exchange market is decentralized and has no certain location. Second, most traders use leverage, i.e. borrowed funds. So, what can be the source of information? We cannot obtain the accurate data, and we don’t need it, actually. It will be enough for us to know the relative volume compared with candlesticks: low, medium or high. There are several sources that can provide us with this information. The most popular are:

1. Volume from futures market

2. Tick volume

Let us provide more details about these two main sources.

Futures market

Stock exchanges provide official figures. The Chicago Mercantile Exchange (CME) is considered to be the biggest one in terms of turnover. Deals on main currency futures are conducted here, so information from this exchange is highly credible. How to obtain the information:

Method 1. Open a trading account with a broker that is registered in the US (the initial deposit at such companies starts from USD 10,000) or its dealer that works in other countries (with lower entry threshold of USD 2,000). The quick-witted ones can even register a demo account, but it usually has anexpiration term.

Method 2. Find free (or partly-free) online services:

1. CME web resource

2. Clusterdelta

3. Tradingview

Tick volume

Have you seen price fluctuations on the MetaTrader platform? So, these fluctuations are ticks. The number of ticks per a unit of time is tick volume. This information is default and is available on the platform in the section Indicators – Volumes – Volumes. It shows how many times a price has changed for a certain period, but it does not show trading volume. However, traders can calculate the relative value of trading volume with the help of this data. A price cannot change even by one tick without any significant investment. So, tick volume is a good tool for calculating real trading volume.

Tom Williams who developed the VSA method said a lot about the use of tick volume in his book "Master the Markets". So, the fact of efficiency of tick volume analysis is unquestionable since the VSA founder himself admitted it.

What source provides more accurate information on volume? In fact, the volume data from CME and tick volume are equally credible. Any of these indicators can be applied for estimating the relative volume at a certain period of time (high, medium or low). So, you are free to use the indicator that seems more suitable or reliable to you.

Forex trading volume is a rather useful tool that can help traders to forecast changes in a trend and see possible points of reversal.