Hi. I'm new to ET, but have read all I can find on the subject of Price/Volume relationship in the long threads here... I KNOW that a) this might not be the right ET department to be asking a Forex question and b) that I'm not operating at the levels of a dbphoenix (for whose wisdom and time I give hearty thanks), but nevertheless, maybe a bit of cross-pollination might prove useful? I have at least determined that the relationship of supply/demand; price/volume/spread; S/R et al is the area of study and focus that will make me the best trader I can be. I see clearly (albeit in a theoretical state as yet) how these relationships can be studied in the stocks/commodities markets as the volume data is descriptive and relevant. BUT. Forex volume data is, I understand, a different beast. I just subscribed to the excellent Multicharts platform (Forex Pro version) only to find that they no longer even provide volume data on the charts in any form â valid data or otherwise! Natiurally I'm asking them the same questions... I have accounts with CSMFX and various MT4 brokerages which DO provide on-the-chart Volume data as a histogram, but offer no real help in determining the source or 'nature' of that data â so I don't know if I should apply what I'm starting to learn, to it. Or are they just smoke 'n' mirrors gimmicks â eye candy for the herd? Forex is a very liquid market. It has activity. Why (please) is it's Volume data so different to non-forex volume data, if indeed it is at all? Can I 'trust' the volume data that, say, MetaTrader offers? Do the principles and relationship between price and volume apply in the same way in Forex as they do elsewhere? I know a lot of the blackbox systems (like, for instance, TradeGuider) say that their Volume Spread Analysis approaches are equally applicable to Forex as Futures, but if that's true, why would a venerable, respected charting outfit like MultiCharts drop Volume Data from its studies arsenal altogether? Any help in this area is greatly appreciated. Even if it's just a one-line pointer to a previous thread that I've not yet been able to find... Many, many thanks
Volume is not a magic bullet, and there is no law that says you have to use volume when analyzing price action. When analyzing price action, there is a hierarchy of visual data, within that data, volume is at best a distant 3rd. If you're having trouble with obtaining consistent volume data, I suggest you put volume on the back burner, at least for the time being. Support and resistance, supply and demand will be a much better area of study, as all you need is price data.
For sure, and thank you Chuck, but isn't volume data an intrinsic component of determining Supply and Demand? Depending on whose threads you read, Volume (looked at in relation to price and spread) does rather get cited as being the 'footprint' left behind by "professional money"... no? Tom Williams's own TradeGuider platform is based on what he terms 'Volume Spread Analysis'. I've read his treatise on same and it seems to be all about volume. But I'm arguing with other people's arguments... :-(
The volume data that the MT4 brokers provide is a ruse. It is merely the number of tick changes per period.
As I thought â that was the deduction I've gleaned from all these threads here and elsewhere. So what is the Forex's equivalent of Volume or am I simply barking up the wrong 300ft Redwood... i'm not trying to justify the application of Volume as a supreme TA necessity, just trying to understand what Volume actually means in Forex terms.
There is no volume data because there is no central exchange. The only thing close to volume is that which is reported by the CME for FX futures, but that is hardly indicative of underlying spot volume (a correlation could be assumed, though impossible to test/prove).
Price is always king. Supply or demand can manifest from any number of transactions. Price alone can show you which is in charge. Volume can be helpful at times to determine this, but still, price and support and resistance will give you the important information.
The fog begins to clear... thank you. Ok, so onwards and upwards in the pursuit of Supply & Demand wisdom... I'm currently absorbing dbphoenix's excellent PDFs on S&D from a 2004 ET thread. I'll finish Tom William's book and go hunting for the work of anyone who has addressed the subject and as it relates to Forex. I have to assume it has it's own idiosyncracies...? Do you have any advice for further study (not that I won't be studying the market itself...) Thanks for your patience and help.
Isn't the problem a bit deeper than that? There is no standardised FX contract, all traded currencies float freely and every pair combination is possible. i.e. what is your unit of measurement? All you have to go on is supply and demand for each pair which manifests in the price action. I'd be interested in an FX trader's view of this as this is just my amateur understanding of the issue.