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?
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 [I]daily[/I] 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.
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?
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.
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.
Now you can’t tell me that entry was not after an upthrust? We’ve had the discussion about true volumes and broker volumes and all that, to be honest I’m not exactly sure what the Volume Indicator in MT4 actually shows from broker to broker, but what I do know is that these setups appear time and time again and behave very much in the same way that you expect volumes in any market to.
This seems to be false. It’s unlikely that the correlation in retail forex volume would be accurate since it so widely spread out among different brookers. FXCM is one of the bigger, and their volume represents only 0.5% av total market volume.
Thanks. What you say seems to be the only logical answer to my question, since there still is no centralized exchange.
But how come that credible FX-brookers like FXCM are advertising their “Active Trader” account with the access to this funciton (they call it market depth)?
I’ve read your message a few times and I believe in what you’re saying. I’ve earlier thought about using the volume of the CME currency futures for trading the underlying FX-pair, BUT I think I’m now going to leave that idea.
Sorry Haank off topic for just a second. Thanks Rhody, I can’t believe I used the term “the fact is it seems” LOL. It’s nothing like a fact it’s just me, correlating over about a WHOLE two weeks worth of data, so I apologise for my silly assertion. I find the whole retail vs. commercials difficult to get my head round, like if 60% of retail are on the right side of the trade and presumably commercials are right more than they’re wrong, but when retailers are wrong it costs them more etc., can of worms but I’d love to understand more about this side of FX. Now volume you say…
OK I admit I was lazy not to explain, but sometimes you go to the effort of making valid points in a post thinking you are contributing to the start of an interesting discussion and then it dies, here we might disagree fiercely but it’s still a good debate.
I did do one heck of a lot of research on this and found no real answer to my questions, I loaded numerous MT4 terminals and I drew my conclusions from research and observations of Forex in comparison to the writings on the subject about stocks, and in my view it compares and my trading is more profitable.
I’ll give you that (placebo effect), honestly I have been looking out for it, it’s kind of like I still have a 21ma on all my charts, I know it doesn’t mean anything of significance, but I’ve grown to like it, it’s like an old friend, I could trade around it all day long, it’s a marker.
So as long as my volume indicator works as my marker I’ll keep it, that is until you send your German Sheppard over to trade for me!
