yes I have seen that article.
my quote from below is taken out of context. what i was referring to was the volume data that some market makers or ecns provide. such data reflects the volume done by that individual mm or ecn, and not the entire spot fx market. because it is decentralized, there is no such data. and any individual ecn or mm, which are retail for the most part, are tiny compared to the market as a whole (like less than 1/10 of 1%). using that data for trading is like taking volume data from a small, unknown equity ecn or ats that caters to retail traders (i.e. not a major one like BATS) and trying to make a judgment about nyse volume. or determining the number of fish in the ocean based on the number of fish in an enclosed sound almost completely cut off from the ocean.
a related issue is the “level ii” data that mm/ecns provide. an imbalance at that ecn doesen’t really tell you anything about the actual spot interbank market. just the limited liquidity on that platform. unlike traders in the futures pits, this data will not be of any use to you (except perhaps to explain why spreads are so wide (narrow).
compare all that to exchange traded futures (or equities or anything else with central data/central ctpy/exch traded).
now, with respect to using futures data to make judgemets about spot fx - i suppose you could extrapolate such data to a certain degree (folks do look at COT reports every friday). though again, these are in fact different markets. for instance, what is globex data from the asian or european session really going to tell you about spot? there is almost never much volume on globex overnight. otoh, volume during the pit sessions (U.S. session) can provide information regarding the conviction of a move, etc. whereas spot is very active at most hours, futures are not.
i wouldn’t waste too many brain cells thinking about this. concentrate on candlestick patterns, other patterns, price action generally; learn to use and understand some basic indicators as an adjunct (rsi, stoch, macd; pivots). figure out how to determine s/r; trend, etc. And at first, only trade with the longer term trend. (scalp fading tredns for small retracements is not for beginners). trade what is happening, not what you think should happen. and be flexible. systematic in what you are doing, but flexible. b/c market conditions change and what worked all summer during the low vol range trading may not work when the markets begin to trend again (in other words, shorting at the top and going long at the bottom - risky in a trending market…on uptreds in long term charts, buy on retracements to support. vice versa on a long term downtrend. when consolidating, play breakouts (up or down - usually these things continue the prior trend; regardless, trade what is happening, not what should happen). if you get a triangle consolidation in an uptrend, and it breaks up, good - trade it once it breaks. if it breaks down, you might want to sit it out (as you would be trading against the trend). ototh, maybe the trend is a weak/neutral one. and trading the downside break against the trend with a tight stop could be ok…or maybe you sit oiut the breakdown, and if a true trend reversal has not set in, you trade long once the uptrend resumes at a level of prior support…use your good judgement…
once you have figured all that out, then maybe you can start thinking about what vol and open interest in the futures market might be telling you something about the direction of the spot market.
good luck!
