Why Is Tick Volume Important To Monitor In The Forex Market?

Low liquidity means you can get stuck in positions, unable to close out a trade and forced to accept increased risk of losses should the market turn against you. Low liquidity, particularly in the stock market, can also translate into higher bid-ask spreads. High trading volume indicates whether momentum is continuing. When news events do get released, especially during the big releases like Non Farm Payrolls and Interest Rate Decision’s, its highly dangerous for professional traders to place trades. Volume Profile tracks the number of buy and sell orders for an asset in each point.

It demonstrates the volume distribution in Forex market and also provides a detailed understanding of the big players’ positioning. On top of that, it reveals the actual connection between price, volume and time. Professional tool for accurate market entry, demonstrating the strength of price movements and market makers’ positions. These reversals usually happen when the two lines of the indicator makes a crossover. Second, you can use it in trend following and also combine it with other technical indicators. The chart below shows the Kilinger Oscillator applied in a chart.

Volume trading in forex means something slightly different to securities volume. In FX trading, it’s the number of lots traded in a currency pair within a specified time period – put simply, it’s define dow jones the amount of currency that changes hands from sellers to buyers. Quite often, Forex traders encounter indicators and expert advisors that apply tick volume to analyze or trade currency pairs.

What does high trading volume indicate?

Hope you can see that at this point the demand is taking the lead and the chance for an upward move shows. In addition, the key here is to know the intentions of the market and mention the key level in your plans or analyzes. WESTPAC analysts predicted a decrease in AUDUSD to 0.70, and then a rebound with potential in the medium term to even 0.75. Of course, the volume can show interesting price action at any time.

This is often why traders are cautious to rely on it for decision-making. Forex and CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 60.00% of retail investor candlestick park seating chart accounts lose money when trading CFDs. Volume indicators tell us how active the trading activities are in the current market scenario. As a result, they could be great additions to a trading strategy.

Some assets tend always to have high volume, as they are popular among day traders and investors. Other assets tend always to have low volume and aren’t of particular interest to short-term traders. In a rising or falling market, we see movement exhaustion typically, sharp price movements, combined with a sharp increase in volume, signal the potential end of the trend. All 3 candlesticks on the chart show a strong upward market.

Both are useful metrics for traders and typically they have a high positive correlation of up to about 90%. If the figure increases, it shows the currency’s accumulation. Whenever the price of an asset increases or decreases with relatively high volume, it is viewed as a stronger, more significant move. Find the approximate amount of currency units to buy or sell so you can control your maximum risk per position. Experience our FOREX.com trading platform for 90 days, risk-free.

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Compare the buyers and the sellers’ forces to understand who is currently in the driver’s seat. The same situation can be said about volume when there is selling pressure. For example, the price of Bitcoin declined sharply in May 2021 as the volume of selling increased. Toggles between showing total volume for each row, splitting each row into buys and sells or showing their difference. If a Custom option is selected in the Sessions section, you can configure the session time period. Use the first two drop-down lists to select the start and end time of the period, and the third one to select the time zone.

what is volume in forex

Volume trading indicators can be used in any strategy, but only for confirmation of signals. To make trading decisions only on the basis of their information − it is impossible. In the market there are no large players, and data of the indicator are created by a lump of transactions with small volume − their efforts insufficiently for the strong movement of the price.

1 standard lot is 100,000 units of currency, which is calculated once, instead of being calculated 100,000 times. In order to determine what volume Forex trading is, we need to bring an example of FX trading lots. Let’s imagine that a trader just opened 1 standard lot for JPY/USD.


First, one needs to calculate the typical price by adding the high, low, and close and then dividing by three. Second, the person calculates the raw money flow by multiplying the typical price with the volume. The MFI is then calculated bitfinex review by saying 100 minus 100/(1+ Money Flow Ratio). If the current day opens below the previous day’s value area look for price to retrace back towards the Point of Control and then proceed to fall (the direction of the day’s open).

Should I buy during a bear market?

Early price declines help

Your average cost will drop during a bear market, and this will bolster your long-term returns. If you do this deliberately and understand the benefits of buying shares when they are cheap, you may be able to avoid the terrible feeling that other people have during market declines.

When important data is released, such as the US Non-Farm Payroll report or monetary policy decisions by central banks, candlesticks might show high volumes of trading activity. This could be strange, since large traders usually refrain from trading before high-impact news releases. The chaotic environment and increased volatility could result in unexpected losses. If the price reaches a key decision level on lower tick volume, there are chances that this level will get rejected. This price acceleration, which is not supported by increasing volume, shows that big traders have decided to stay away from the move. He has been a professional day and swing trader since 2005.

In this article we teach everything you need to know about volume plus teach a great strategy as well. Rowan Crosby is a professional futures trader from Sydney, Australia. Rowan has extensive experience trading commodities, bonds and equity futures in the Asian, European and US markets.

What is a lot in Forex and how to calculate trading volume?

Thus, the tick volume tells us rather about the frequency of transactions. It doesn’t tell us much about the real number of contracts in a given unit of time. It is worth noting that the volume that you can buy on our website shows live contracts appearing in the market, not only after the candlestick is closed. Thanks to this, you can see the balance of forces in the market before creating a new candlestick.

However, the most important thing is volume actions in specific places. These places are the support / resistance levels, which result from the subject matter of our ebook on market sentiment. Let me remind you that you can also purchase such ready-made levels on our website Every day you will receive a template for your Mt4 platform and you will be able to use the levels drawn immediately. These levels are updated on a daily basis by our team that sweat their brow searching for and figuring out the intentions of big market players. The next chart is an example that not every green volume bar on an upward candlestick signifies demand. Notice that the candlestick marked with an arrow has a huge shadow on the top.

Value Area – The range of price levels in which a specified percentage of all volume was traded during the time period. Typically, this percentage is set to 70% however it is up to the trader’s discretion. Volume is a handy tool for studying trends, and there are many ways to use it.

However, the experienced traders know that having the profitable strategy alone is not enough if there is no sensible money management technique. Adam Milton is a professional financial trader who specializes in writing and curating content about commodities markets and trading strategies. Through both his writing and his daily duties in trading, Adam helps retail investors understand day trading. He has experience analyzing various financial markets, and creating new trading techniques and trading systems for scalping, day, swing, and position trading. This is one of the most common indicators and most exchanges and brokers offer this metric.

What is trading volume?

OBV marks the particular volume of the day as bearish or bullish depending on whether the day has been bearish and bullish. It then adds/detracts that volume to the running open total. The total then indicates the overall sentiment of the market. Therefore, they are secondary indicators of future market direction.

what is volume in forex

The first thing that most traders will use volume profile for is identifying basic support and resistance levels. It is important to note that using Volume Profile as an identifier for support and resistance levels is a reactive method. This means that unlike proactive methods which are based on current price action and analysis to predict future price movements, reactive methods rely on past price movements and volume behavior.

However, once you get to know what is behind them, it is likely that your trade will never lack this indicator again. Another candle formation that communicates an analogous message to the absorption candle is what is known a stopping volume candle. This is a move that carries high volume, but this time, the size of the candle is much more compressed. Generally, low volume is volume 25% or more below the average of the previous two weeks. Generally, high volume is volume 25% or more above the average of the previous two weeks.

Trading volume doesn’t just indicate how many transactions are occurring, but also includes the total amount of an asset that was bought or sold during the transaction. Shifts in trade volume can make observed price movements more significant.Higher volume for a stock is an indicator of higher liquidity in the market. One of the key preconditions for making a consistent profit in financial markets is a sensible risk management. The newbie traders often mistakenly believe that the success in stock exchange trading depends on a highly profitable algorithm or a secret strategy.