Forex trading volumes - what is it? How are volumes formed?

• Why are volumes needed?
• The Basics of Using Volume with Price in Any Market
• Climax parabola
• Peak sales
• Let's sum it up

Whatever technical analysts do, it comes down to two things. Either the price itself on the chart or its various statistical interpretations are analyzed. When we add volume to the equation, we have an additional, powerful tool for assessing crowd psychology. Accordingly, by studying trending volumes, we can better understand why price patterns work in the first place.

Thus, we will significantly expand our method of finding the sum of evidence, which was described earlier. Volume not only indicates the enthusiasm of buyers and sellers, but is also a variable that is entirely dependent on price movements.

In this chapter, we will discuss the basic techniques for using volumes. Later we will return to this topic again, but with a detailed discussion of price patterns.

Forex volumes

Volumes in Forex are numerical data that show the total size of the sold and purchased volume of a trading instrument, in our case this is a currency pair.

As we know, all price movements, from the tick to the monthly candle, occur due to the fact that there is an imbalance between buyers and sellers. If the interest on each side was, for example, 1 million lots, then all transactions would be concluded at the current price and we would not see any movement. But the reality is that fluctuations occur constantly, and this is connected precisely with the transition of initiative from one to another.

This is how trends are built; if the market is growing, it means that demand prevails and purchase volumes exceed sales volumes. It’s the same with the downward movement – ​​sellers predominate.

Example . Let’s say that at a price of 1.2000 of the EUR/USD currency pair, buyers in total want to take 1000 lots. At the same price, sellers enter the market with a volume of 500 lots. Demand exceeds supply by 500 lots, so the volumes of sellers will be completely absorbed and the price will move further up. And it will move until these 500 lots are purchased, that is, until there are people willing to sell 500 lots.

This can happen at around 1.2001 or at around 1.2010, the point here is different, in the very presence of a price change. At around 1.2001 there will be a new volume of buyers and also a new volume of sellers, between which there will again be a difference. If it is positive, then we will see a continuation of the movement, if negative, then a decline. In general, a normal mechanism.

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It is from such fluctuations that trends are built. If you look at minute charts, or even better, watch how a minute candle is formed, you can see that fluctuations are constantly occurring. By the time the candle closes, the price could go up 10 times and down 9 times. As a result, we will see a growing candle. But there is variability here, which is illustrated by two examples:

1. News is coming out on the US labor market, a very important event, which, along with meetings of various central banks, leads to significant fluctuations in the market. Immediately after publication, a strong movement begins. The price can jump up 30 points in just a second, then come back in another two seconds, and then make oscillatory movements up and down until it closes. Let's say it remained bullish, that is, it closed above the opening. During the entire time, that is, in one minute, a huge amount of money entered the market. Some people bought, others sold, and in the end there were more buyers. But literally on the next candle the situation can change dramatically and the price will literally collapse.

2. Now let's look at what happens at the auction at the very beginning of the trading day. Extremely low activity, quotes hardly move, there simply is not a large number of participants in the market, since only Wellington and Sydney are open. Accordingly, a minute candle can simply stand still and close in the same place where it opened, that is, it will have no shadows or body at all. Or for the entire minute there will be one single upward movement. This will happen because there are practically no sellers at all, and a literally small amount by market standards is enough to move the price up. And then the buyer may want to sell and the next minute candle will be of a similar size, only now closed down.

From these two example situations it should be clear that what matters is the difference between the interest of buyers and the interest of sellers. In this case, we need to take into account that we can move on low volumes, or we can move on high ones, but the difference will remain approximately the same, and the trading volume indicator in the first case will be incomparably small compared to the second.

Without having enough experience, it is impossible to immediately say what is happening in the market now and why there is movement - the trading volume can be both large and small. There is only general information, such as, for example, the fact that in the Asian session liquidity is much lower than in the European and American ones. This, by the way, can be seen by the increase in the spread value, as well as a possible slight delay in order processing.

What is volume in the forex market

Market makers trade only in large quantities on Forex, thereby significantly influencing exchange pricing. Some novice investors do not know what volume is and why it is needed.

This is the number of exchange transactions that are carried out over a specified period of time.

When carrying out trading transactions, you should definitely analyze the VSA. This takes into account not only the number of transactions, but also the location of the candles. Market analysts regularly monitor Forex volumes, making various strategic forecasts.

Using VSA you can find out:

1. In which direction are traders trading? Those. the process of moving towards the concentration of the largest number of assets.
2. Time when you should not enter a trade.
3. A period when trend movement cannot be predicted.

It is impossible to find out the exact volumes on Forex, because... this exchange is decentralized. Therefore, there is no special place where you can see this information. Brokers can provide such data only about their clients, which means it is not complete.

By analyzing the market through VSA, special volume indicators are created that provide information about investors working with their brokers.

The most reliable online Forex volumes can be found from the largest brokers such as Alpari, who have the maximum number of clients. But even they cannot say what the real volume of transactions carried out on the exchange is.

Formation of volumes in Forex

Along with this, there is another important aspect. Everyone has probably seen how the price makes a confident movement, forming candles of the same direction, with virtually no shadows against the trend, and the fluctuations themselves within the candle are not so significant, that is, everything indicates that a powerful trend is brewing within the current time frame. And then suddenly a reversal occurs, and even more sharply, which, with one or two candles, completely covers the trend that just recently looked confident.

This can happen on any time frame, both minutes and four hours. And it turns out this way because the market is formed by two types of transactions, that is, the trading volume consists of the following:

1. Current deals that are concluded directly on the market . This refers to the so-called “Market Entry”. These are those participants who trade at current prices, that is, in real time.
2. Pending orders that are focused on a specific price . For example, the minimum and maximum of a trading day are considered to be quite important levels. If we grew during the Asian session and then began to fall, you can be sure that the price will definitely stay at the low of the day. It happens, of course, that such a level is completed without any delay at all, but this is rare. And the slowdown occurs precisely because significant volumes on Forex have accumulated near this level, that is, there are many pending buy orders. And if, for example, they fell on low volumes, then this level will reverse the price and direct it upward, completely absorbing sellers. In general, everything is built on the simplest logic.

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It is not possible to find out real volumes on Forex. Although exchanges usually publish numbers, this does not apply to currency trading. The market is decentralized, so everything can be calculated only roughly and based on data from banks and liquidity providers. That is, the total daily turnover is estimated at 5-7 trillion dollars, but no one can count for sure. Accordingly, any attempts to provide information from the entire market are simple falsification, no matter how tempting it may sound.

It would be too simple - you know where the volumes are accumulated, and from there you enter the market with this huge money. But it doesn’t work that way, so let’s just look at how it is proposed to evaluate and what volume indicators exist in Forex.

Why are volumes needed?

Volumes will help us in the following three situations.

1. When we compare price and volume, it is important to understand whether they work in unison. If yes, this is further evidence in favor of the trend.
2. If price and volume diverge, then the underlying trend is not as strong as it appears. When such a divergence is observed during a breakout of a price pattern, the probability of a false signal increases significantly.
3. It happens that price action begins to gently hint about a possible trend reversal. At the same time, volumes can produce such an impressive picture that it literally shouts about future changes right in your face. As a result, if you've been fussing over price and completely ignoring volume, an obvious warning or a unique opportunity may fly by. Then you will cry.

Types of volumes and volume indicators in Forex

So, volumes in Forex mean different variants of numerical indicators . The main ones include the following, and some of them are displayed with real data:

1. Tick volume . This is the simplest type of market volume, which is calculated according to a very simple scheme. For each bar, the number of fluctuations that the price made during the period of its formation is calculated. For example, for a minute candle this will be the number of tick movements (both up and down) in 60 seconds.

The logic is simple - if the market is active, then any trend will develop with the absorption of the interest of one of the parties, and the more significant it is, the more active the movements will be in both directions. For example, having met a serious level, the price can form a horizontal movement for some time, during which time a fairly large number of these tick fluctuations will accumulate. In the MetaTrader 4 trading terminal there is a default indicator of volumes on Forex by tick; to add it you need to right-click on the chart and select “Volumes”.

After this, vertical bars will appear on the graph at the bottom. Each of them will display the volume for each bar. They can be easily distinguished - the higher the bar, the more fluctuations the price made during the drawing of the bar. Such data cannot be called very indicative, but there is some benefit from them. For example, a trend reversal on high volume indicates that the move is likely to continue in that new direction. You can also often notice an increase in volume as you progress through a level. But in the case when there is a good trend, but volumes are low, you can expect a quick reversal, since without opposing interest, movements tend to fade away.

2. Data from any broker on open positions . This is by no means a general interest in the market, but only a small “piece”, since the general ones cannot be imagined, as was said earlier. In this regard, such data cannot be considered as a full reflection of the situation, but to some extent they can be useful. Despite the fact that this is just a part, it can suggest the general mood. There will be a certain amount of error, but still such volume data on Forex can be useful. So, positions are usually presented in the form of open orders and pending orders at different prices.

The overall picture is not entirely clear. But everything is quite simple. The data area can be divided into two halves - upper and lower. The top one represents prices above the current one, the bottom one represents prices below the current one. Knowing how the trend has developed recently, it will become clear how many orders were opened. By dividing the area into the right and left halves, we get specific sales and purchases. Short positions are shown on the left, long positions on the right. The scale indicates the percentage of open positions relative to the total. All the same is presented for pending orders, which is important. Using these data, you can imagine the overall picture of the market and try to predict reversals at levels with high volumes in Forex.

3. Cluster Delta . This is a service that presents information no longer in the form of orders, but specifically by the number of open contracts. Moreover, it is the differences – deltas – that are constructed in the form of columns with numerical data. That is, it shows what the difference is between purchases and sales at the current price. A sharp change upward (positive or negative value - it doesn’t matter, we are talking about the value itself) will indicate that there is great interest in the market from one of the parties, and this level is not easy to pass.

The potential can be assessed through a numerical value - compared with the nearest ones. If it grows several times or tens of times, then significant sums are definitely pouring into the market, so anything can happen, like a sharp acceleration of the trend, or an equally sharp reversal, you need to look at the indicator itself. Everything looks very tempting until the trader realizes that this data is from futures. And this is secondary for the foreign exchange market, so these are not volumes on Forex in the full sense.

Using information about volumes in trading

As I noted earlier, you need to focus on the market and history.

4.1. Stock market

In the stock market, green bars with large volumes almost always indicate buying by large players and funds. After such a situation, we can expect continued growth (at least in the next couple of days). Let's give examples on real graphs

Gazprom, May 2022:

Sberbank, October 2022:

Sberbank, January 2022:

The stock market responds well to signals given by volumes.

As for the fall, the situation here is not clear-cut. Most often, a high trading turnover indicates high interest on the part of participants. As a rule, the fall stops.

However, Magnit shares could not stop:

In the US stock market, V-shaped reversals occur very often on large volumes, which is an ideal entry point into a long position.

There is a saying: “buy the dip,” which means “buy up the dips.”

• Trading on the stock exchange - instructions;
• Investing in shares - what you should know;
• How to invest in securities and what it gives;
• How to make a fortune from investments;

4.2. Forex market

The Forex market uses tick volumes. In fact, they do not provide any information. From them one can only judge the number of transactions of the “crowd” at a particular time. No matter how much I tried to find logic or a pattern, I didn’t find anything interesting.

There are rarely stable long-term trends in Forex. Quotes behave extremely emotionally. For beginners, this is a difficult market.

If we expand the history of trading, we can conclude that over time, the turnover of Forex trading is steadily growing. Therefore, it is problematic to draw any conclusions about how “big” it is compared to a year earlier.

Trading charts on the MICEX

This is what the graph of trading volume in Sberbank shares on the MICEX looks like over several months of 2015:

In this case, the dynamics of the value of securities is compared with the volume of trading in shares, which allows for a more in-depth technical analysis.

As for the foreign exchange market, this graph perfectly shows how the volume of currency trading and its value are interconnected:

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See also: Gazprom shares Price of AvtoVAZ shares today Stock quotes

Description of Better Volume indicator signals

Improved tick volume indicator Better Volume automatically evaluates the current volume and spread of the candle, comparing them with previous values, and gives us some kind of signals indicating the presence of high/low volume and the size of the spread. Here is a list of color signals that appear in the Better Volume histogram.

Red color means there is high volume and a wide spread on the up bar. Appears at the beginning and end of uptrends, as well as during corrections during a downtrend.

White color means high volume and wide spread on the down bar. Appears at the beginning and end of bearish trends, as well as during corrections during an uptrend.

Yellow color means low volume. Appears at the end of trends, as well as during corrections.

Green color – indicates the presence of a bar with a small spread and significant volume. Appears at the end of trends (transfer of assets from market makers to ordinary traders) and during profit taking in the middle of trends.