The Difference between Equity Volume and Forex Volume

Forex volume measures the “total worth” of a market move. If a currency pair has a strong price move, the perceived strength of that particular move depends on the volume amount for that period.

On the other hand, moves backed by higher volume forex are more important. By monitoring foreign exchange volume, an investor should not be left behind on NB market moves. The important moves will normally come on a spike when there’s more volume than usual. FX volume can help an investor prepare for trend breakout. Investors should also be able to ID periods where there is consolidation and calm ranges as they will have lower volume.

Forex volume figures are significant because when a great amount of trades take place in a certain period, it means there are several sellers and buyers that set this price. This means that the session close will be correct because a consensus was reached between the investors that are selling and buying. If foreign exchange volume was indeed low, the trade price was set by less organizations and individuals and may not be a true representation of what it’s really worth.

Forex Volume based indicators varies from equities volume based indicators. Every equities share traded is considered one volume, so selling hundred shares, and then someone buying those hundred shares counts as hundred in equities volume. On the other hand, the Forex market is decentralized and it’s impossible to track of all the amounts of contracts on any given day. That is why foreign exchange volume is measured by counting how many price changes or ticks there are during the session. There must be a set amount of signed contracts to move the price 1 way or another, and every tick represents this number. This means that you can still measure volume, although it’s done in a bit of a beat around the bush way, when compared to equities.

  • Forex Volume should not be used as primary evidence, but rather as corroborative trend evidence.
  • FX Volume can be utilized to confirm price changes. If, at the start of a trend, there isn’t a pick up in volume activity, this could indicate a weak trend that does not have enough commitment.
  • If there is a pick-up in the amount of volume forex, this could mean that a price change may be nearing. The movement direction during this forex volume increase can possibly indicate some upcoming action.

Article Source – http://www.studyforex.com/volume.html