# How much is traded through each broker?

Hey fellow forex traders. I have been absent for I think a couple years now. I am back with newfound vigor and my passion has been rekindled. I’m developing a new qualitative system but must first do my research on some fundamental questions I have. I’m creating an algorithm to trade off of volume similar to my system 13 thread.

From what I have read online volume in Forex represents ticks, or it represents how many lots where traded at that particular time frame. I don’t know which is correct so some clarification would be nice. Each broker records a slightly different volume than the rest. I’m curious… Is the volume they report only the volume they represent or is it a summation of all broker participation that they are able to measure? I don’t know all the brokers now it’s been a while but I assume oanda and fxcm are still leading brokers. however is Oanda and FXCM leading brokers for the small fries like us or does that include the big fish as well?

Is their any way to figure out how much volume of the market share is contributed to by oanda specifically? I understand FX is decentralized but oanda must have some kind of figures of how much money was traded through them yeah? Looking at the broader picture though, if total volume was 100 for a particular time frame… oanda is accountable for 30, fxcm 20 etc.? Is it possible to figure that out? I’m trying to find the relationship between Forex volume and price mathematically speaking so I can create my algo. Finding out major brokers contribution to market volume seems like a fair start for me.

[quote=“Leg0nd, post:1, topic:119246, full:true”]
I’m trying to find the relationship between Forex volume and price mathematically speaking so I can create my algo. Finding out major brokers contribution to market volume seems like a fair start for me.[/quote]

@Leg0nd - Hello

• The algorithm you intend to create will never yield useful information. Here’s why:

You are basing your efforts on the misconception that the volume handled by a broker determines the prices offered by that broker. Think about your assumption, for a moment. If that were the case, then high-volume brokers would offer very different prices from low-volume brokers. But, this is not what you will find, if you do some broker comparisons.

The foreign currency market is one market in which prices are set by market-makers at the top of the forex food-chain. These market-makers are the big banks in the interbank network and the central banks of several major countries. This market-making process is basically a process of driving prices into pools of liquidity in order to fill orders (and to generate speculative profits for the banks). Each bank makes their own prices (Bid and Ask), but their prices can’t deviate too far from the prices of their competitors in the interbank network – otherwise, competitor banks will simply arbitrage the disparity, buying low from one bank and selling high to another bank, the result of which will be to force divergent prices to approach convergence. So, there is typically a tight cluster of prices among the banks in the interbank network.

Retail forex brokers (the folks you are proposing to study) generally deal with several (or many) of these big banks. The brokers typically refer to them as liquidity providers (LP’s). Brokers pick and choose the best available prices from the LP’s they deal with, and this picking-and-choosing has exactly the same effect as the arbitrage that I mentioned above – it tends to buy up the low prices and sell down the high prices, forcing convergence.

Brokers who operate as retail market-makers then take the best wholesale prices (the best Bid and best Ask) offered to them by their LP’s, and mark them up by adding a pip or two to the best available ASK price, and subtracting a pip or two from the best available BID price, which results in the retail prices offered to us, their retail customers.

Retail brokers who operate as STP or ECN brokers do not mark up the wholesale prices of the LP’s. Rather, they pass those wholesale prices on to us, and charge us commissions proportional to the size of our trades.

In both of these cases – market-maker and STP/ECN – retail brokers move roughly in lock-step with the market determined (made) at the interbank level by the big banks. If a significant difference occurs between the prices of retail brokers, retail customers with sophisticated trading algorithms will quickly arbitrage the difference, earning a profit when the divergent retail prices are forced to converge.

So, that was a long-winded way of saying that you won’t find the correlation you are looking for between retail prices and retail volumes (or any other retail metric).

• Regarding tick-volume – Ticks are price changes, not trades. If a broker’s ASK price notches up by one pip, and two buy orders are filled at that new price, the change in tick-volume is one tick (representing one change in price), not two ticks (which would represent two additional trades). So, you can’t take the tick-volume in a particular currency pair, for a particular broker, in a particular time period, as the number of trades in that pair, handled by that broker, in that time period.

However, for a given currency pair in a given time period, every retail broker’s tick-volume is roughly proportional to that broker’s retail trading volume. And that approximate proportionality can be used profitably by VSA traders. Check out Petefader’s thread Supply/Demand, VSA, Wyckoff with Petefader on using tick-volume in trading.

And, for a given currency pair in a given time period, very large (high volume) brokers’ tick-volumes are roughly proportional to trading volume in the overall forex market. And that approximate correlation is very useful for studying trading patterns in the overall (worldwide) forex market. It’s the basis for many studies (including my own) of daily trading sessions based on trading volume.

• Regarding FXCM – As you may or may not be aware, FXCM no longer operates in the U.S., although they are active elsewhere in the world. Overall, FXCM is a much smaller broker than they were 2 years ago, when you were last here in the forum.

• Regarding the trading volume of the U.S. brokers – Currently, there are just 4 retail forex brokers licensed to operate in the U.S. Two of them – Gain Capital’s Forex.com division, and Oanda – have about 81% of the retail forex market in the U.S. The other two – TD Ameritrade and Interactive Brokers – together have the remaining 19%. These percentages are based on customer funds on deposit, not trading volume. However, trading volume handled by each broker is roughly proportional to the customer funds they hold. So, those percentages will give you a rough idea of trading volumes at the 4 U.S. brokers.

These metrics are reported monthly by the CFTC (the regulator of futures and forex in the U.S.). The latest figures available from the CFTC are figures for August 2017. September’s figures will be released in a few days (there is generally up to a month’s delay between the end of a reporting period and the release of data for that period).

For August 2017, customer funds on deposit at the 4 U.S. brokers were as follows:

Gain Capital (forex.com) - \$254,086,577 (48.8%)

Oanda - \$168,185,010 (32.3%)

Interactive Brokers - \$39,037,499 (7.5%)

Total for 4 brokers - \$520,991,685

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Thanks for the detailed response. From what I see in the market, high volume and low volume have the same and different effects on price. Really low volume can yield huge movements in price just as well as high volume can and visa versa with small movements in price. Just because there a lot of transactions going on at the same time doesn’t mean the market will make a huge move. Sometimes the biggest moves come from the least amount of volume. I’m basing that statement off of the volume figure I get from Oanda. The data Oanda gives us (Open High Low Close and Volume) is the only data I have access to to create my system off of.

About the tick volume… So is the volume oanda gives us tick volume and its only retail tick volume? I know that a tick represents a change in price but doesn’t it also represent .1 pips yes or is it simply a change in price as you say with no numerical value associated with a single tick? I’m not assuming a tick represents one trade either as you mentioned above but I understand why a noobie would.

FXCM is news to me, thanks for the update. Personally I have always used Oanda and never liked FXCM, but thats irrelevant right now.

So now I’m in bind. I want to create something using volume, but from what I can understand the volume I get from the broker is almost useless because it represents retail volume which has virtually no impact on the market… I’m a math guy I don’t use indicators etc I want to write algos and find patterns. Where else do I get good data from that is free if possible for me to study that has useful volume figures? I’m trying to figure out the minimum volume it takes to move the price from point a to point b at a given price so that I can simplify the volume given to us and see if their are any patterns or correlations… But from what you have told me either this is not possible or I do not have access to the right data.

It’s even worse than that: it represents only their own retail volume, and they’re not in the interbank market anyway. It’s certainly almost useless. Some would just say “useless” without the “almost”.

You need to trade forex futures, instead of spot forex. That will solve your problem: there’s one central exchange (the CME) and volume is easily available and reliable. Other than that, the front month of each forex future is more or less the same as the corresponding spot forex instrument.

Yes, you certainly sound like a futures trader, to me.

Thanks again for your response. Honestly I have never thought about futures. All I know about them is they are traded in contracts not shares. I also know you have to have several thousands to get started (at least with oil you do I believe). I know you can lose your arse in futures too, but I have done zero research on that so correct me if I am wrong. It’s more risky or the same as forex?

So If I trade futures, I will get reliable data? That sounds super enticing! For years I was trading Forex data. No wonder my results where not very flattering, the data I have been using is absolute garbage. Future’s data will not be usable to trade forex yeah?

Many trader try to set an algorithm for their trading pattern. But my opinion is not to spend much time on setting up any formulas. Rather it’s better to focus on market analysis. Because the market is very versatile you can’t fixed any formula for any situation. It might works for a certain time but not always. But if you give time on market analysis you will understand the market pattern and thus the market goes you will trade with the flows.

You do with any futures.

True, but you can with anything.

Overall, I think it’s much less risky than forex.

Partly or mostly because of the lower leverage and the fact that the brokers are honest and have no incentive for their customers to lose money, and don’t deliberately attract the naive and gullible with a range of shady marketing techniques, and because of better regulation.

It also probably attracts, overall, more knowledgeable, realistic and sensible people, who are overall not as undercapitalised and not looking to get rich quick.

Thanks both of you for your response. So what does the volume in futures contracts represent? Does it represent contracts or is it still just a change in price? Also I like to see patterns in numbers based on realistic values. The things I measure are important and useful, I don’t just write randoms equations and trade off them. I test months of data before I even place a trade. I try to back test up to a year back. I do not trade off of pure speculation just by looking at the market. However As much as I have watched the market I can see patterns in its movement but not well enough to trade solely off of that.

so when the futures market spikes or drops, it’s not the market maker playing games with the retailers, the market actually makes that kinda move legitimately yeah? I have had many trades in forex where I knew oanda was pulling the strings and causing price gauging like a bunch of crooks. They thought they where slick too, but I had a friend take the same trades as me and his sl’s would not get hit like mine. Sometimes his orders wouldn’t trigger but mine would and visa versa. Forex is at the retail level is filled with trickery from the brokers.

Im doing lots of research now but the terminology of futures is much more intense than spot fx. Consider me a complete noob at futures. Where do I start to learn about everything I can about futures? Please share some resources. Also do you recommend a good broker I can research too? I won’t be trading futures for quite some time but if I can download the platform and get access to the data I can go ahead and get a good start on my system. Thanks again

Contracts.

A futures price chart looks just like any other price chart, but you can add volume as an indicator. You can even use “volume bars” or “volume candles” which define the intervals of the bars or candles in terms of the numbers of contracts traded on the exchange, if you want to (though not many people do).

You should. A year at least.

Yes, much more so than is true of the charts of a counterparty spot forex broker.

And they’re one of the very least crooked ones, widely and rightly regarded throughout the industry as being as honest as you can find. Most are horrible, compared with Oanda.

There will always be anomalies like that between different spot forex brokers. Each is displaying only their own prices for their own products. There’s no reason for them to be identical.

You’re not buying or selling any currencies when you trade with a counterparty spot forex broker. You’re just having a bet against them, on their terms and condition, and at prices which they control. Not surprising that so few retail traders make a living that way?

Definitely.

“Intense”, maybe; “different”, surely. It just seems intense, probably, because you’re not used to it?

Trading is trading. Futures are just more honest and realistic than spot forex, and easy to profit from because they’re free from many of the spot forex problems effectively imposed by counterparty brokers.

Note that the price movements of each front month of forex futures contracts are very strikingly similar to those of the equivalent spot forex market pair.

Interactive Brokers. AMP as well. Either. Futures brokers are typically honest. They have to be. And it obviously suits them better if their clients win rather than lose.

Platforms aren’t typically linked to brokers.

You can use almost any established platform with almost any good broker.

Sierra Chart and Ninja Trader are both good platforms. Trial versions are free. Sierra may be the best of the widely available ones, but it’s also one of the more complicated ones. Ninja is understandably popular. Anything and everything’s far better than MT4.

Futures data isn’t free.

Unlike spot forex data, where the data the broker gives you is simply data of their own prices, which costs them nothing to provide, in the case of futures there’s a central exchange (which is why volume information is available, of course) but there are also exchange fees for data.

Not high fees, especially if you’re not an active trader, but not free.

This is why futures brokers don’t normally give you more than a 2-week free trial, and even that only if they’re taking you really seriously and believe you’ll probably fund an account: it’s costing them something to provide data.

For really reliable historical data, for backtesting, you have to pay something, too. Again, not expensive, but not free.

You need to be well funded, to trade futures. It’s real trading, not amateur, home-based playing. Think in terms of \$10,000 minimum to trade 1 contract (and that’s a conservative estimate: many people would say \$15,000+).

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Thank you very much kind sir. I will be reading everything from those links you provided. Paying a fee for access to high quality data sounds good to me. At least I know the data has real value. If the data is reliable like you say it is, I will be able to determine how contracts move price… or rather how many contracts cause price movements etc. I could easily build something off of that. Sounds exciting to me! It’s going to take a while for me to get to the 10k mark. I had figured it would take a minimum of 10k to trade futures anyway and that’s just one contract at a time which is completely okay with me. Thanks again for all the information. Do you trade futures as well? Which ones are your favorites if you do?

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When I can.

Not all spot forex pairs have a corresponding future, to trade.

I trade Pound, Euro and sometimes Yen futures (instead of GBP/USD, EUR/USD and USD/JPY-inverse, respectively) but I still trade spot forex, too.

I think it’s hard to beat Oanda, overall, without having really big funds. Their spreads aren’t always the very best, but they’re honest in a frankly crooked industry and they don’t kick out steady winners or make life difficult for them.

Hi Leg0nd,

FXCM releases our monthly volume numbers, and our latest release for the month of September shows our clients transacted \$196 billion in trading volume. And we had over 122,000 active accounts during the month of September.

You’re right that most discussions on the forum probably relate to tick volume, which most brokers provide. FXCM also shows you actual volume with our ‘Real Volume Indicator’. Here’s a screenshot of the indicator on the chart during the Bank of England rate decision.

You can see that during the 5-minute candle following the release of the rate decision, our traders transacted 218,756,000 in actual volume on GBP/USD. Directional real volume is also available on the platform which displays volume individually for long, short, net, and total volume values.

FXCM is one of the few if not only brokers that offers this type of volume data to traders.

Jason

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