Volume in the forex market
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  1. #1
    Haank is offline Newbie
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    Default Volume in the forex market

    Hi

    I'm quite new to forex trading, but I have traded stocks for a long time.

    I want to trade some of the major FX-pairs intraday. Like when I trade stocks I want to look at the orderflow/orderdepth and the volume in the market. I know that the FX-market isn't traded at an exchange (OTC). And I've been told that it means that the order is sent to the broker who's getting several different prices from multiple banks. Then the customer is allowed to trade at the best of these prices.

    Am I correct so far?

    This means that the orders I can see in my trader is ONLY the orders created by MY SPECFIFC brookers customers. How reliable is this for short-term trading? This must depend on how many brookers there are out there? How is the total volume of the market spread among those brokers?

    Is there any other way to get a clue about the orders put on the market and the volume going through it?

    I've heard that you can trade FX intraday without having any information about the voulme in the market. What do you think?

    Someone told me to use the orderdepth/orderflow of the most liquid futures contract of the specific FX-pair. Those are traded at CME Chicago, right? What do you think about that? Then you get at least the complete picture of the futures contract because it is traded at an exchange, but how reliable is this for trading the underlying FX-pair?

    Grateful for answer!

    Thanks!

  2. #2
    rhodytrader's Avatar
    rhodytrader is offline FX-Men Honorary Member
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    Quote Originally Posted by Haank View Post
    I know that the FX-market isn't traded at an exchange (OTC). And I've been told that it means that the order is sent to the broker who's getting several different prices from multiple banks. Then the customer is allowed to trade at the best of these prices.

    Am I correct so far?
    This means that the orders I can see in my trader is ONLY the orders created by MY SPECFIFC brookers customers. How reliable is this for short-term trading? This must depend on how many brookers there are out there? How is the total volume of the market spread among those brokers?
    FXCM is one of the biggest retail forex brokers and I think they reported doing about $450bln in volume for the month of December, and something over $1trln for Q4. Compare that to an estimated daily average volume for the market of $4trln and you get an idea of how insignificant retail forex volume is in the grand scheme of the market.

    Is there any other way to get a clue about the orders put on the market and the volume going through it?
    Really, that information has to come from the dealing desks in the intra-bank market, which means having contacts.

    I've heard that you can trade FX intraday without having any information about the voulme in the market. What do you think?
    Depends on how what you're trying to do, but it's certainly possible.

    Someone told me to use the orderdepth/orderflow of the most liquid futures contract of the specific FX-pair. Those are traded at CME Chicago, right? What do you think about that? Then you get at least the complete picture of the futures contract because it is traded at an exchange, but how reliable is this for trading the underlying FX-pair?
    The futures and spot rates will be closely linked, and you may get an indication of what volume looks like in general terms, but keep in mind that the futures contracts will also largely reflect the pattern of their timezone. For example, the CME contracts are generally going to see much more volume during the US day than outside of it.
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  3. #3
    Haank is offline Newbie
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    Quote Originally Posted by rhodytrader View Post
    FXCM is one of the biggest retail forex brokers and I think they reported doing about $450bln in volume for the month of December, and something over $1trln for Q4. Compare that to an estimated daily average volume for the market of $4trln and you get an idea of how insignificant retail forex volume is in the grand scheme of the market.


    Really, that information has to come from the dealing desks in the intra-bank market, which means having contacts.



    Depends on how what you're trying to do, but it's certainly possible.



    The futures and spot rates will be closely linked, and you may get an indication of what volume looks like in general terms, but keep in mind that the futures contracts will also largely reflect the pattern of their timezone. For example, the CME contracts are generally going to see much more volume during the US day than outside of it.
    Thanks!

    Ok, I will not use retail forex volume then. A likely case could be that we're heading for a support in the market; and the case could be that you can see clear indication of support in the volume of for example 15 of the bigger brookers. At the same time you may not see any indication of support in the volume of 5 of the bigger brookers, one of this could be FXCM and I could have been using it.

    That's how you're thinking, right?



    Those contacts you're talking about, I guess that procedure is illegal?


    Are the CME currency futures the most liquid currency futures available?

  4. #4
    purplepatchforex's Avatar
    purplepatchforex is offline FX-Men Honorary Member
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    Quote Originally Posted by Haank View Post
    Ok, I will not use retail forex volume then.
    You are dismissing it far too easily.
    Keep It Simple Stupid

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    Jaroon is offline Junior Member
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    Haank you may find it interesting to check out Oanda's Open Position Charts and histories. Nothing to do with volume but I think it's a great indictor of how the retail market is positioned in general, think I read Oanda holds about 200m$ in reatailers funds.

    The fact is the retailer seems to be on the wrong side of the market frequently but unfortunately not to the degree where we can look at what there doing and do the opposite and count the pips

    Tick volume with my rather small broker correlates nicely with the larger brokers but again this is only retail and as you stated not true volume.

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    rhodytrader's Avatar
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    Quote Originally Posted by Haank View Post
    Those contacts you're talking about, I guess that procedure is illegal?
    No. It's not like insider trading or anything. Which isn't to say what goes around the inter-bank dealing desks is always quality info, mind you.

    Are the CME currency futures the most liquid currency futures available?
    For US timeframe traders certainly.
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    rhodytrader's Avatar
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    Quote Originally Posted by Jaroon View Post
    The fact is the retailer seems to be on the wrong side of the market frequently but unfortunately not to the degree where we can look at what there doing and do the opposite and count the pips.
    Careful with that assumption. I saw a study not too long ago (it was not made public, so I cannot provide specifics) that indicated 60% of trades done by a large group of retail traders were winners. That would not tend to support the "retail is wrong" argument, but it definitely supports the "retail has poor risk management" one since the group collectively lost money.
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    Haank is offline Newbie
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    Quote Originally Posted by purplepatchforex View Post
    You are dismissing it far too easily.
    Please give me one reason not to do so then.

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    purplepatchforex's Avatar
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    Quote Originally Posted by Haank View Post
    Please give me one reason not to do so then.
    1,500 PIPS PER MONTH with this method, VSA/SR/fibb etc.
    Keep It Simple Stupid

  10. #10
    Haank is offline Newbie
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    What means retail traders? I have to ask since I'm not able to find a likely translation into swedish.

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