Are Volumes Useful in Forex or Not?

Traders are always on the lookout to find useful data and information that might give them a competitive advantage over the competitors. It is even more evident in the technical traders where they have to open different levels of the market, i.e. low, high, and closing of the market.

There are many indicators in the trading world, but all are transformations of the price data. In most markets, volume proves to be quite useful. Being aware of the fact that there was heavy trading in a given period or not is quite helpful information. The data can be used to filter the trade signals and to look for breakouts with a substantial volume.

Volumes, however, are almost being rendered useless as they are mainly coming from only one broker because the market is decentralised. The only volumes that are seen to matter are streaming through Reuters or EBS.

Two Distinct Ways to Observe Volumes

1. Total executed

It is the general knowledge of how to use volumes. They are the typical volumes which are indicated on the x-axis. The volume profile is usually shown on the y-axis. This type of amount is very potent for trading purposes.
Here, the main aim is not to focus on how many executions were finalised but instead, the primary attention is in comparing different executed volumes. Most of the time, it is the comparison of different volumes as the number of shares traded is not put into consideration. After all, there is nothing to be compared with them.

It makes sense because that which may be regarded as high volume today may not be high volume another day. But for trades happening the same day, the ‘high volume’ bar indicates the difference between an imminent reversal in a trend.

2. Realisations on the bids or depth of the market

Executions on the bid may be structured independently of the price. It is widely known as delta. The extent of the market shows resting orders that are also referred to as liquidity. These volumes are useful in determining the direction of the more significant participants. All you need to be aware of is if the prices are going down or if they will rise. Executions will categorically show you all that information.
This method can be applied in various ways among which the shape of the order book is part. In case the ratio of bids to offers is quite heavy, then expect the prices to rise. However, it is not a hundred percent certain as the rule only applies in specific areas on the charts.

What is the Bottom Line?

The answer is straightforward. Both of the above methods are useful in forex funded account. Many traders are interested in knowing if the day’s volume was below or above average. They will also look for information like if the day’s volume standard deviation was below or above average.

Volumes are Useful

Volumes have already been found to be useful to a forex funded account holder. Volumes will show you exhaustion; they will also indicate accumulation. Volumes can even enable you to know the strength that a move has. If the volume is increasing in a given trend, then most definitely the price will move in that same direction.