Volume indeed cannot be calculated based on the number of contracts traded and the size of those contracts since forex market is decentralized by its nature. As price changes back and forth volume adds up.
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In short volume is a not a precise entry and exit tool however with the help of indicators entry and exit signals can be created by looking at price action volume and a volume indicator.
Forex what is volume. This is a common question that i get and there ! can be some confusion around it so i thought that i would write a quick blog post to explain how volume in forex trading works. 1 tick is 1 volume. Volume is very easy to be verified in stocks but with forex it is different.
If we look at tradingview we have a volume field. The forex market measures volume by counting the tick movements. Volume of trade or trade.
As traders were always looking for useful data that might give us an extra edge. What forex traders can and do use however are volatility indicators such as bollinger bands and atr to measure market direction and to try to predict trends. The forex market is a decentralized market which means that there is no formula for volume or method of keeping track of the number of contract and contract sizes such as in the stock market.
There is no central system and without this there is no truly accurate method of measuring true volume. It can be measured on! any type of security traded during a trading day. Thats even ! truer for technicalprice focused traders where all we have is the open high low and close of a.
In 2011 caspar marney head of marney capital and ex ubs and hsbc trader conducted an analysis of actual volume and tick volume in forex. Volume is calculated based on price ticks. That volume originates from the feed that tradingview use.
But also the correlation between tick volume and actual volume traded is incredibly high. Volume of trade is the total quantity of shares or contracts traded for a specified security. To measure raw volume in forex is unfortunately nigh on impossible.
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