It seems that you cannot in any way justify the use of retail forex volume for trading. The only thing you do is to contend it makes alot of profit for you. [B]Doubtful[/B].
This site you seem to be controling Purple Patch Forex Training Course doesn’t increase your credibility, really.
It’s a FXCM retail trader sentiment indicator packaged with marketing jargon to give them (FXCM retail trader) another toy to play with.
I take note of it but that’s it. In the past there have been some serious questions asked about the reliability of this information.
Intention of order book (money-flows) WITHOUT single centralised exchange moves price in FOREX.
A lot of former stock trader I know of needed time to adjust to that fact because stock trading strategies inc. volume didn’t work for them in FOREX.
Do you mean that you do use volume in your forex-trading? “You take note of it”
Well lets say you see a pin bar reversal at a swing high point and this is accompained by a high volume spike or increasing volume upto this point, I would give the reversal a higher probability of continuing than if volume was flat or decreasing. You only need to scroll back the chart and this [I]seems[/I] to be the case, no?
I don’t use volume in my forex-trading because volume is not quantifiable in forex.
I take note of crowd sentiment because that what the FXCM sentiment indicator is. The FXCM retail trader crowd’s sentiment is Short GBPUSD…that’s what I take note of. It has no influence on my trading prep and how I trade.
On the other hand… you guys admit that you didn’t “waste” any time on learning VSA methods. Therefore you are unable to tell whether it works or not. Of course, in spot market, you can’t use true Volume, because there is no feed of true Volume.
You can however use Tick Volume, that represents how many times the price have changed in that particular bar. THAT feed in fact is a full substitute of true Volume in futures. You can backtest it… you can do whatever and find out for yourselves. It DOES work and it is perfectly logic.
Tom Williams, the author of VSA says that his analysis can be used in any kind of market. He clearly stated that it works for forex as well while using Tick Volume. Trust me, he is probably far better and more experienced trader than some of you guys. Especially newcomers.
Seeing as tick volume is only the frequency of quote price change and in no way measures the actual volume of transactional flow, you cannot call this perfectly logical. Yes, it could be a very close relationship, but it’s not perfect. It is like looking at Market Profile distributions that are built on price movements vs. those built strictly on volume. They are usually quite comparable, but sometimes considerably different.
Volume doesn’t mean how many up-/down-ticks that have taken place during a period of time.
Of course not. But Tick Volume does. True Volume and Tick Volume both measures the ACTIVITY of the bar. That’s exactly what we need. Smart money buying means increase in activity. If you read MTM by Tom Williams you would know this.
Also, for purposes VSA we need only RELATIVE Volume.
Therefore although Tick Volume feed among many brokers tends to differ, it doesn’t matter to us. All we care about is the spikes - the lowest and highest points. And from my experience I can say that the spikes are on the same bars among all price feeds I have seen. Purplepatch also did some research on this topic.
I am not here to completely change your opinions about VSA. I honestly don’t care what you THINK or how you TRADE. I am just saying it works for me and it works for MANY MANY people. It either dramaticly improves their own methods or they use VSA all alone. I am in this thread just to explain why it works. Not to convince you that it does. You would have to see it for yourselve and quit being just “theoretical” about it. 
I hardly believe in something that isn’t possible to prove theoretically.
Smart money buying means increase in activity.
No…it does not.
The minute informed participants start flushing stops you can kick your VSA into the dustbin because you will see NO increase in activity because there isn’t any for an indicator to pick up on.
If there are fresh offers/bids flowing in while stops being flushed your VSA will give you false indication.
Accumulation/Distribution phases are being manipulated by smart money…didn’t you know that… I’d do the same if I were them.
If you read MTM by Tom Williams you would know this.
Also, for purposes VSA we need only RELATIVE Volume.
Please tell me the page in Williams book were he mentions VSA applicable to Forex…
Don’t you use this market profile/price distribution, volume at price, TPO, method on forex? Spot Key Support and Resistance, and Target Levels!
Well, actually he answered my question about forex in one of his webinars just couple days ago.
It is not in his book because the majority of the book was written in the ninety’s and the forex wasn’t that popular at that time. In those days they use a lot of forex charts in the VSA club. (Very succesfully)
If you don’t believe me you can write an e-mail to any of the TradeGuider team members and they will be happy to answer you.
Not as much as I’d like, but yes. That said, it’s done with price-only distributions, not with volume. I use volume when looking at other markets, though.
I’ve been watching this thread from the beginning. I hope you don’t mind if I join in.
Two things that we’ve all heard a million times:
(1) there’s no way to measure dollar-volume in the forex market
(2) tick-volume mirrors dollar-volume, so tick-volume can be used as a proxy for true dollar-volume
But, are those things true?
For some time, I’ve been curious about how overall world trading volume ($3.98 trillion per day) rises and falls over a 24-hour trading day, as various countries and regions ramp up and ramp down their daily forex activity.
I decided to gather trading volume information on the 31 largest forex players (countries), arrange them by time-zones, and feed their hourly trading volume into a spreadsheet to see just how much foreign exchange trading volume the world is doing, hour by hour.
All the information I needed for this project is available in the Triennial Central Bank Survey 2010, published by the Bank for International Settlements (BIS). All the information, that is, except the distribution of each country’s trading volume over the 24-hour day. For that, I had to make some assumptions.
Naturally, I was worried that my assumptions about the hourly distribution of each country’s aggregate daily total volume would skew any results my spreadsheet produced. But, I was amazed to discover, after testing various distributions, that the effect on the bottom-line results was small — almost negligible.
When I plotted the spreadsheet results on a histogram, I looked at the shape of the histogram and realized that I’ve seen that shape many times before. It looks just like a “typical” tick-volume chart. Let me explain what a “typical” tick-volume chart is.
If you’ve studied a lot of tick-volume charts, you know that the patterns they display vary widely from day to day. However, they tend to vary around a sort of “baseline” pattern. This baseline pattern is like a “mean” that tick-volume tends to revert to. This “baseline” pattern is what I’m calling a “typical” tick-volume chart.
The GBP/USD tick-volume chart on the March 2 forex trading day (5pm EST March 1 - 5pm EST March 2) gave a fairly good example of what I’m calling a “typical” tick-volume chart. So, I decided to use it for a comparison.
Here’s how hourly tick-volume in one currency pair (GBP/USD), on one particular day (March 2), compares to the average hourly dollar-volume in the overall market:
Two comments on the chart above.
(1) I think the similarity between the two histograms is evidence (not proof) that tick-volume is a reasonable proxy for actual dollar-volume.
(2) Maybe a “typical” tick-volume chart (that is, one that mirrors the average daily ups and downs of dollar-volume in the overall market) does not provide any trade-able information. Perhaps, instead, only significant deviations from that “typical” shape provide useful information which could be factored into a VSA methodology.
I’m hesitant to accept that similarities between distributions indicates similarities between volumes (point 1). Let’s take the stock market as an example. There tends to be high relative volume in the morning as traders react to overnight developments, a lull through midday, then another high relative volume period as the session winds down where traders are positioning themselves for the close. This pattern is very regular, much like the forex pattern above, and with clearly understandable reasons based on market structure. The pattern is similar each day regardless of how much volume is transacted. It isn’t deviations from the distribution pattern that traders view as significant (point 2), but the variations in total volume transacted, which we cannot ascertain just from distribution.
There is clearly value in looking at distributions, which is the focus of Market Profile, but in that case it’s a distribution of volume by price, not by time.
Clint you’re a star, well I’m seeing what I want to see so what I say is bound to be complimentary.
But I think you deserve a big hand for thinking it all through and going to the trouble of sorting the data and graphing it all out.
Good work Clint. I still come back to the logic that if the retail brokers are all able to display the same price on our charts using the same price feed, then the “activity/tick” volume is also the same…give or take some exceptions on both. Then I read this from Tick Volume - ForexHound.com the Forex Trading Portal which also makes sense:
"[I][B]…Currencies move around for a multitude of other reasons making volume size kind of irrelevant. If Honda decide to hedge 500 million before shipping cars overseas of what relevance is that to you? If you saw the level II data you would see swaps going on in chunks like 5 million, 15 million, 50 million, 5 million, 5 million, 100 million, 20 million… etc etc. What does this tell you? Nothing… You do not know who is moving this money or why.
But what tick volume does tell you is the amount of activity going through the market. The forex market has a normal daily pattern of activity which I wish to see - it is the breathing of the market. That generally amounts to low volume in asia, large volume in london, lulls before news releases, and medium volume in the US. Thats a normal day. Any deviation to this is something to take note of.
Tick also shows you certain things for instance a sudden bust in the tick rate at a key level can indicate that price has run into an area thick with take profit orders or stops, and this can move the market directionally temporarily until all these orders have gone through. Forex does that a lot; it has to sometimes chew through a ton of orders that were piled up at certain levels before the prevailing sentiment can take hold again.
Also you can see when a move is dying as all the volume begins to slow down, and it also gives clues when the market is just in a directionless drift.[/B][/I] "
VSA for currencies may be a bit different than for stocks, but it sure seems adaptable.
I think I agree with you. But, I am no expert in the use of VSA.
Regarding the name, I wish it were called Volume RANGE Analysis, instead of Volume Spread Analysis. “Spread” is a word we use every day to mean something entirely different from the [B]High-Low Range[/B] that John Williams calls “spread”.
A few things I’ve noticed about the Volume argument itself.
The basis for the arguments against are that Tick Volume does not show any real information, unlike Actual Volume does in stock and therefore is totally useless and anyone who uses it has been hoodwinked in one way or another. Also since it has no connection to any real data it doesn’t work it won’t work so there’s no point in trying it and never will, and those of you that do use it will fall into a pit of despair.
The basis for the arguments for is that there is visual evidence that there is an uncanny resemblance to how you would expect Volumes to coincide with S/R levels on your chart and Tick Volumes, and day in day out I use Volume to confirm my trades, I don’t know much about trading stocks so maybe there is no direct comparison, but the ones that argue for using Volumes have actually studied it tested it, appreciate that it’s not real volume, and come to a conclusion.
Now I’m and advocate but I still have a little scepticism, but there is no way I’m going to start ignoring what I see in front of me working time after time, I posted a link earlier in the thread to a chart that illustrates how volumes confirmed an upthurst, the reply I had was that ‘My German Sheppard could have spotted that’, but the fact still remained that a volume peak coincided with the upthrust, now I don’t have a German Sheppard with that capability - so what is a man to do?
