Forex Futures in relation to Forex Spot?

This guy here goes by the name “eremarket”

I came across one of this answers in a post and i liked it. So i went through his posts and answers and he is pretty cool. Seems like a sucessful trader (except his fxbook account). anyways, in an answer to a question he posts this answer. Can anyone please explain what is he talking about and can I find “volume data of futures” ?

His answer:

Trade… volume analysis methods work well in forex… if you base your decisions on futures volume. I personally trade forex futures almost exclusivly (for a number of reasons).

I don’t want to debate whether what i’m saying is correct or not, because I don’t think that will get us anywhere.

WHat I would recommend doing…is watch volume for the nearest expiration contract in the corresponding futures market (for example, Eur/Usd is basically the 6E futures contract. next expireation date is dec…so you’d watch the volume on the 6E-december expiration)

You will find that if a the highest volume spike of the day results in a very solid looking pinbar… that you will often see a reversal in trend from that point on.

And this reversal will occur in futures… as well as forex.

On a second note… I traded forex spot full time for about 9 months before i transitioned to futures…and a core aspect of my scalping in forex SPOT was to watch the volume in the corresponding forex FUTURES market. It worked extremely well, because, wouldn’t you know it, when the euro futures contract starts moving up… the eur/usd spot moves up at almost exactly the same rate!

Hi CyberGuy,

I don’t know him at all, and haven’t noticed his posts. :8:

Hmmmm … what other way(s) do you have of assessing whether or not he’s a successful trader, apart from his fxbook account?

Sounds like a question for him, more than for others, perhaps, but I’ll try, anyway …

I agree with his comment, there.

The closest-month’s futures volume is very closely correlated with spot forex volume (and the advent and growth of all the automated HFT arbitrageurs, etc., in the market makes sure that it’s staying that way), so you can take that volume, for all trading purposes, as being accurately indicative.

Spot forex and “the nearest month’s future” of the same pair (if there [B][U]is[/U][/B] a “future” available: there isn’t, for [I]all[/I] pairs) are the same thing, really, except that the future has volume available and spot doesn’t. It’s just like having one extra item of information available, that spot forex traders don’t have.

Yes; I agree with him again, there. (I’m assuming that he made the “December” comment in November or perhaps early December?).

I agree again, [B][U]but[/U][/B] …

… I don’t think that’s actually a good example, because the same pin-bar will appear on the spot forex chart anyway, so it’s hard to see what’s been gained by looking at the futures chart, in that case?

Well, he was faster than me, anyway (I traded spot for years and years before switching to futures on professional advice. Mind you, I’d been offered the advice years earlier and was just desperately slow to take it, so that was my fault :8: ).

Again, I agree, but I don’t understand how that helped him, because he doesn’t mention anything that he could get from the futures chart that he couldn’t get from the spot chart?

What I get from the futures chart that I can’t get from the spot chart is the ability to trade from constant-volume bars (which are obviously not available on spot charts, because volume itself isn’t available).

And that I do find very helpful.

But I’m therefore trading from a different chart - the bars are constructed differently.

I have found that by doing that, I can trade by doing exactly the same things that I was doing by technical analysis of spot forex charts, and with better results and a more stable equity-curve. Which is of course enormously worthwhile.

The underlying reason for this (I think) is that people using (for example) a 15-minute forex chart to trade from, will see the same pattern in the morning and in the afternoon, and trade them the same way, typically with the same position-sizing, almost unaware that the morning one had four or five times the volume behind it that the afternoon one had, and they’re just either not thinking about that at all or don’t realise how significant and important it is. But it [B][U]is[/U][/B]. But as mentioned above, that benefit (which was the reason I started looking at the corresponding futures volumes) comes most easily by using constant-volume bars - and he appears not to mention that (in what you’ve quoted, anyway)?

I know that some people trade spot forex on the basis of futures volume by adjusting their position-sizing in accordance with their perception of the reliability of the TA signal on the assumption that the reliability is proportional to the underlying volume. It seems a bit messy and complicated to me, to do that, when you can just trade the futures directly from constant-volume bars.

Yes, but it’s not free (other than perhaps for a 2-week free trial - you won’t get a “long” free trial because unlike spot forex prices, it does actually cost brokers something to supply them).

You can get them through a futures broker by opening an account at one (for example, NinjaTrader Brokerage - which I’ve never used, myself, but they have a decent reputation and they recently won some independent brokerage industry award - will give you a 2-week free-trial of futures information on a demo account).

The cost depends on which ones you want, and on what you’re using them for.

I believe that it [I]may[/I] be possible to get them direct from the “Merc” (CME) for only $5 per month, if you’re just using them for research and not actually trading from them, but I don’t promise because my information about that may be out of date by now (it’s from a couple of years ago).

(Edited to correct bizarre English grammar which is just weird, to foreigners like me … :8: )

Thank you very much for the reply.