Forex: Using volume ticks charts. Expert question | Currency Futures


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Forex: Using volume ticks charts. Expert question

  #10 (permalink)

south west UK
 
 
Posts: 122 since Dec 2011
Thanks: 74 given, 15 received



pawnbroker View Post
It is worth noting that tick volume in spot forex is a measure of the number of times price quotes change, where each change is one tick. In instruments like the ES futures a tick has another meaning, which is one trade regardless of the volume done on the trade.

So volume plotted on a 150 tick chart on spot forex would be 150 for every bar, if the software is configured to treat ticks as volume. For this reason, it is not possible to use volume in the usual way with tick charts of spot forex.

If a futures contract was being studied, which does have data for trades and volume, then the volume on each bar of a tick chart would vary and that would allow volume spread analysis (VSA) to be applied. A suitable example would the 6E contract.

To use VSA on the spot market, it is necessary to use time based charts, kagi or point and figure (P&F) charts to see changes in the activity on each bar.

With a P&F chart, you can look at the volume to see if the move is loosing strength or if a climactic event may have occurred. I prefer to have real volume rather than tick volume for VSA, but you can study the Dollar Index (DX) on the ICE exchange or the 6E contract along side spot forex with the EUR/USD pair.

In the P&F chart from NinjaTrader of the EUR/USD spot market, look at the high tick volume on the selling at (A) with a spread lower than the previous bar. There is supply, but the selling is being absorbed to some extent.

At (B) the selling and buying is not strong. If the market was weak then the selling should be stronger. It is also possible to read that the market is weak at that point, since the buying is not strong either, but we are in an uptrend, so the onus is on the bears to change the trend.

At (C) the buying is strong, but going down on the up bars, which indicates that the market is becoming exhausted of buyers.



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Hello pawnbroker and thankyou ever so much for this post, as it is clear and well explained, containing all the pertinent facts as i also see them. i trade spot forex only, and in my early days spentm much time reading vsa etc, including Wyck and Wiliams etc. I trade sucessfully without volume but there is so much potential there. Would you mind if i fired off a few detailed questions on this subject to you?

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