How to interpret volume

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At the bottom of the market, if the price is rising, you should see volume increasing. So every time you see a spike, volume should increase at that spike. This is accumulation and distribution stage. As the price goes down, volume should increase, and as the price goes up, volume should go down, by looking at both price and volume you can really tell if you are in an accumulation or distribution phase. This is in an ideal world .

 
jpsantos8576:

At the bottom of the market, if the price is rising, you should see volume increasing. So every time you see a spike, volume should increase at that spike. This is accumulation and distribution stage. As the price goes down, volume should increase, and as the price goes up, volume should go down, by looking at both price and volume you can really tell if you are in an accumulation or distribution phase. This is in an ideal world .

No. And No. Also No.

There are 4 parties at play to create price. -Wanna Buy and Buying, Wanna Sell and Selling.

Forex markets are distributed markets. They dont offer volume, also they have tick volume available. (Tick volume arguably representing real world volume with an accuracy of around 80%)

Accumulation phase as well as distribution phase are described by Wyckoff, but can happen with high variance of the original definition.

The correlation you are drawing does not exist.
 
Dominik Egert #:
Tick volume arguably representing real world volume with an accuracy of around 80%)
That's nonsense. The tick volume in your (and any other) MetaTrader terminal is just a simple counter of price updates coming in, and has nothing to do with the real volume of a transaction (in lots).

And while the price feeds of every broker differs, the tick volume is different for every broker. So completely useless. 

We're working with (real retail) volume data for a few years now, so I know what I'm talking about.


 

For smart trading decisions - need to see actual buy-side vs sell-side initiated volumes separately, directly from exchanges.

What are the practical solutions for this in MT5 - that's the challenge yet to figure out.

 
Daniel Stein #:
That's nonsense. The tick volume in your (and any other) MetaTrader terminal is just a simple counter of price updates coming in, and has nothing to do with the real volume of a transaction (in lots).

And while the price feeds of every broker differs, the tick volume is different for every broker. So completely useless. 

We're working with (real retail) volume data for a few years now, so I know what I'm talking about.


Actually no.

There have been multiple studies done to see and scientifically show the correlation.

See this one as an example:


I know you have published an article about this topic, but I do disagree with its reasoning.

You can find more resources online which show there is a close correlation between tick volume and real volume.
 
Daniel Stein #:
That's nonsense. The tick volume in your (and any other) MetaTrader terminal is just a simple counter of price updates coming in, and has nothing to do with the real volume of a transaction (in lots).

And while the price feeds of every broker differs, the tick volume is different for every broker. So completely useless. 

We're working with (real retail) volume data for a few years now, so I know what I'm talking about.


can you elaborate more whay does it mean by counter of prices? so there is no way to see the size of each level of the market depth? i use mt5 IC market. there is weird 1 and 15 appearing in level 1 and level 2 of both bid ask offer. do you know what's that? and any broker provide actual size number?


 
alex2019trading #:
can you elaborate more whay does it mean by counter of prices? 

The tick volume, which is displayed as "volume" by default in every MetaTrader terminal, is only a counter of price updates. Whenever the price of an asset changes, this counter increases by 1. It has nothing to do with the volume of the transaction. 

Almost a decade ago, I wrote an indicator that analyzes this data and I quickly noticed that it gives entirely different results on different brokers. Market maker accounts have fewer ticks, while ECN/STP accounts have many more ticks/price updates.

So I quickly dropped it because data or an indicator that gives different results on different accounts is useless in my opinion, no matter what the "studies" want to tell us.


so there is no way to see the size of each level of the market depth? i use mt5 IC market. there is weird 1 and 15 appearing in level 1 and level 2 of both bid ask offer. do you know what's that? and any broker provide actual size number?

Depth of Market is different because it provides detailed information about how many lots are offered for BUY/SELL at what price level. The problem is that this includes pending orders, and big players can use pending orders to mislead others.

They offer a large amount of an asset for BUY or SELL at a certain price level, and as soon as the market moves in that direction, they cancel their order. Finally, you'll only see the DOM of your specific broker, which is sure to be different from other brokers.

You'll find detailed information about DOM in this article https://www.investopedia.com/terms/d/depth-of-market.asp



Our solution is to analyze really executed trades, and this is the most reliable information in this regard because it can't be manipulated. The order is either opened or closed, so we know exactly what's going on.

At least for retail trading sentiment using MetaTrader. It's still a tiny piece of this huge market, but it's a unique insight that offers a lot of interesting and reliable information and it's broker-independent.


Depth of Market Meaning and How to Use DOM Data
Depth of Market Meaning and How to Use DOM Data
  • www.investopedia.com
Depth of market (DOM) is a measure of the supply and demand for liquid, tradeable assets. It is based on the number of open buy and sell orders for a given asset such as a stock or futures contract. The greater the quantity of those orders, the deeper or more liquid, the market is considered to be. Depth of market data is also known as the...
 
Daniel Stein #:

The tick volume, which is displayed as "volume" by default in every MetaTrader terminal, is only a counter of price updates. Whenever the price of an asset changes, this counter increases by 1. It has nothing to do with the volume of the transaction. 

Almost a decade ago, I wrote an indicator that analyzes this data and I quickly noticed that it gives entirely different results on different brokers. Market maker accounts have fewer ticks, while ECN/STP accounts have many more ticks/price updates.

So I quickly dropped it because data or an indicator that gives different results on different accounts is useless in my opinion, no matter what the "studies" want to tell us.


Depth of Market is different because it provides detailed information about how many lots are offered for BUY/SELL at what price level. The problem is that this includes pending orders, and big players can use pending orders to mislead others.

They offer a large amount of an asset for BUY or SELL at a certain price level, and as soon as the market moves in that direction, they cancel their order. Finally, you'll only see the DOM of your specific broker, which is sure to be different from other brokers.

You'll find detailed information about DOM in this article https://www.investopedia.com/terms/d/depth-of-market.asp



Our solution is to analyze really executed trades, and this is the most reliable information in this regard because it can't be manipulated. The order is either opened or closed, so we know exactly what's going on.

At least for retail trading sentiment using MetaTrader. It's still a tiny piece of this huge market, but it's a unique insight that offers a lot of interesting and reliable information and it's broker-independent.


That is actually interesting. I suppose these studies are only valid for ECN market data, as they use that as source.

Tick Volume counter in mql only counts bid-price updates, and misses out on all the ask-updates. I personally think there is relevance to the tick by tick price jump distance, but that's a nother discussion.

Since you are obviously using some closed source data, I guess the closest reference would be sentiment information from various sources, like myfxbook?

Please be aware to avoid self promotion.
 
Dominik Egert #:
That is actually interesting. I suppose these studies are only valid for ECN market data, as they use that as source.

Tick Volume counter in mql only counts bid-price updates, and misses out on all the ask-updates. I personally think there is relevance to the tick by tick price jump distance, but that's a nother discussion.

Since you are obviously using some closed source data, I guess the closest reference would be sentiment information from various sources, like myfxbook?

Please be aware to avoid self promotion.

I am, and I answered as neutrally as possible, based on my personal long-term experience, explaining the differences. 

However, I won't go into further details, but I'm almost sure mentioning competitor sites (especially this one) violates another rule of this forum.

Have a great day, everyone, and if anyone is interested in discussing real volume data, they are always welcome.

 
Daniel Stein #:

I am, and I answered as neutrally as possible, based on my personal long-term experience, explaining the differences. 

However, I won't go into further details, but I'm almost sure mentioning competitor sites (especially this one) violates another rule of this forum.

Have a great day, everyone, and if anyone is interested in discussing real volume data, they are always welcome.

So you are disengaging conversation with me. OK. That's fine.

 
Dominik Egert #:
Actually no.

There have been multiple studies done to see and scientifically show the correlation.

See this one as an example:


I know you have published an article about this topic, but I do disagree with its reasoning.

You can find more resources online which show there is a close correlation between tick volume and real volume.

Yes but what that correlation gives you ?

Not much (though it can be useful, let's agree), as real TOTAL volume doesn't give you much, and as it's only a correlation you are missing the nuances that real volumes could possibly give.

What is really giving an edge is when you have BUY and SELL volumes, and more the granularity of these data is high more it's informative and useful.

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