I’m curious about what type of volume or dollar amount it takes to make a candle move. Does movement occur only as a result of an intrabank transaction of billions/millions or do speculators play a role as well?
How much currency would have to change hands to make a 1 pip move?
Your question is interesting and can have many answers and all the correct ones
Everything depends on the Crossing currency, the day on the week, the hour of trading and the feeling of the market between many other factors.
For example, just now I am observing the graph of the pair GBP/USD 1 H time frame.
The information that I emphasize is the differences between two candles:
Candle A
Date: 28/Nov/08
Hour: 05:00
High: 1.5402
Low: 1.5390
Range or Span of the price: 12 pips
Volume: 77
Versus
Candle B
Date: 28/Nov/08
Hour: 09:00
High: 1.5447
Low: 1.5400
Range or Span of the price: 47 pips
Volume: 1,105
As you can see, the candle B have almost four times high the range of the candle A (12 vs. 47) but the volume is moren than 15 times (70 vs. 1,105)
Therefore the conclusion is: [B]we cannot establish a correlation that give a response to your question[/B].
That such if we invent a factor that allows us to determine that volume was necessary for the change of price of a currency, this is, to divide the total change of price between the volume happened during a certain period of time.
We will be call him volume impact in the price (VIP)
This “new” index was calculated dividing the volume negotiated between the number of pips maximum that I change the price for the same period of time (in this case an hour) in the different hours of the day
In the candle A VIP is 77/12 = 6.4
In the candle B VIP is 1,105/47 = 23.5
Regards
Lobo,
Thanks for the analysis. I think you’re on to something, but what is the volume (77 & 1105) coming from? What constitutes 1 unit of volume? In stocks volume is measured in shares exchanged, but since forex is a non central clearing market, is it impossible to measure volume?
A weekend compares the graphs of two DEMO accounts and observe that for the same cross of Currencies in the same period of time the volumes were different (inclusive the ranges of price and the prices themselves not are the same).
My conclusion (I cannot assure or certify it) is that every graph was presenting the volumes that handled each of the Brokers (and the prices also).
As for the unit of volume, I could be a standard lot (100 K) but is better that you take other opinions of traders many more experts and connoisseurs that I and that take part in this forum.
Regards
I wondered about this question too. I was thinking that each [B]retail[/B] broker has thousands of customers, but since their customers orders don’t actually hit the real world (because you’re playing against the broker and/or their other customers), then only each retail brokers orders can actually impact the currency’s movement because they on the other hand deal with the real world themselves. So does the volume indicator only indicate the volume of flow for your individual retail broker…like within their customer base?
Now ECN’s & the like on the other hand are matching actual buyers & sellers in the real world so I’d think they would have an impact on a currencies movement.
But still the question of how much it takes to make a currency tick is still in question…LOL
If I’ve got it wrong, please let me know.
Sweet Pip:
I agree with you.
I have a DEMO account with HotSpotFX (ECN-Currenex Platform) and Live account with Alpari (MT4).
Hot Spot FX have five decimals, and for example in this moment, the cross EUR/USD have a spread of; 1.3, 1.4, 1.5, 1.6, 1.8 or 2.0 pips, change every moment (once in the night I see a 0 spread in EUR/USD but only for 30 - 45 seconds), and other pairs, like GBP/USD, AUD/USD, EUR/GBP, EUR/CHF have 2 pips of spread without change in all the morning .
I read than the ECN Brokers with the currenex platform give to you the real Interbank price of a currency cross, THE REAL WORLD in the FOREX market.
Regards
As you SURE that a certain AMOUNT is necessary to move a price bar and not just a certain PRICE???
Let me put it another way and maybe it’ll explain why I’m wondering if the right QUESTION is being asked:
Take the Dow.
Now let’s say that HYPOTHETICALLY speaking there were ONLY TWO TRADERS TRADING on a given day. Let’s say that the Dow is at 8 000 at the open. Trader ‘A’ wants to buy Dow at say 9 000 and Trader ‘B’ is prepared to sell Dow at 9 000. Buyer meets seller on price and the Dow would move to 9 000. Now obviously in a ‘normal and proper’ trading day: if the aforementioned were to occur then it would be nothing but a spike.
The point I’m attempting to make (or should I say the question I’m asking) is this:
VOLUME would be required to sustain a move in price in one direction or another (in both currencies and stocks) BUT IF there was just one single order put in by Bank ‘A’ to sell say GBP/JPY at a certain (‘way out’) price and Bank ‘B’ is prepared to buy GBP/JPY at that price, then price would move??? It would not STAY there UNLESS there was VOLUME to support the move but this trade WOULD have made the price bar move???
I guess I’m asking more than stating facts here.
If I’m right then it’s not a particular AMOUNT that’s going to make the bar move: it would simply need a single transaction to occur at a given (higher or lower) price to make it move which IS the original question is it not???
Put it another way:
Let’s say that somebody wanted to buy 100 TRILLION GBP/JPY (if the sheer AMOUNT was going to move price then I’m almost sure THAT amount would move it). If they simply put their order in at the current price: there would be no change in price assuming that they found a seller at their order price.
And another way:
Oil, for example, only moves because buyer meets seller on price. If nobody is prepared to BUY Oil at $250 per barrel then the price is never going to get there. But if somebody is trying to sell Oil at $250 per barrel and and buyer meets seller at $250 per barrel and the transaction is concluded then the price bar would spike to that level.
Regards,
Dale.
it takes ONE TRADE of ANY amount, including 0.00001 lots.
WHY do they call it PRICE MOVEMENT and not VOLUME MOVEMENT ?
Now if the momentum is high, you may never see the trade except on level 2 (and possibly not even then) because it becomes “overpowered” when hit by high volume and momentum, similar to the hells angels when they walk into a bar but with, hopefully, less drastic results !
mp
MP,
So during slow hours (australia/japan session) when you have moments of no action, just ---------------- for a while and then a small blip (1 pip) of a candle forms, that could have been the result of a transaction of mini lot or smaller where buyer and seller agreed as [B]dpaterso[/B] was theorizing.
Larger more continuous candles are the result of many transactions that are all negotiated at different bid/ask combined for that timeframe and thus the formation of a larger candle…no matter what the $ amount was. Correct?
[B]enjoy and trade well
mp[/B]