Tick Volume in Forex

Tick Volume in Forex

Very often, Foreign exchange merchants encounter indicators and skilled advisors that apply tick quantity to analyze or commerce foreign money pairs. Tick quantity that’s current in each MetaTrader platform relies on the variety of value updates (ticks) that come in the course of the formation of a given bar or candle. At first look, it appears to be a good approximation of actual quantity, however in actuality, it’s an imperfect substitute, which generally works poorly to simulate the precise quantity for a given FX pair.

Why tick quantity is dangerous?

First, the primary concept of tick quantity is flawed — one tick (value replace) could also be attributable to both a small quantity commerce or a very giant commerce — it won’t be accounted for in the tick quantity, which is able to enhance by one notch solely. Furthermore, large trades might occur inside the dealer’s present value unfold, which won’t generate a tick.

Second, the primary contributing issue to tick quantity values is the dealer’s information feed. Forex brokers use completely different information feeds based mostly on various mixtures of liquidity suppliers. This ends in discrepancies between what tick quantity exhibits at one or one other dealer; generally, these discrepancies are fairly vital.

Why tick quantity is nice?

Given the dearth of actual quantity info within the international trade market, tick quantity serves as one of the best estimate for this “actual” quantity that retail merchants can discover.

Regardless of the discrepancies in tick quantity at completely different brokers, basic tendencies on this quantity often maintain between brokers. Furthermore, there’s even some correlation between tick quantity and Foreign exchange futures quantity.

Tick quantity discrepancies

Listed below are some examples of EUR/USD tick quantity discrepancies at two on-line brokers and for the EUR futures contracts (steady).

Exness tick quantity from the EUR/USD weekly chart is introduced under. Some quantity ranges are marked with pink traces for readability:

EUR/USD - Weekly chart with tick volume provided by Exness

AGEA tick quantity from the EUR/USD weekly chart for a similar interval with the identical quantity values marked with pink traces:

EUR/USD - Weekly chart with tick volume provided by AGEA

Tick quantity appears to be largely uncorrelated with actual quantity in the futures market. Of course, there could not be a good correlation between spot and futures markets, however there must be at least some correlation between the two. See the identical weekly chart for the EUR futures (6E) supplied by TradingView.

CME EUR futures contract (continuous, 6E) - Weekly chart with real volume provided by TradingView

Conclusion

As you’ve seen, tick quantity adjustments generally don’t maintain even between two brokers. On the identical time, a change in quantity (the amount at bar N is larger than the amount at bar N−1 or vice versa) is essential to operation of such widespread indicators as Better Volume and Volume Suite.

Sadly, the excessive stage of discrepancies between information feeds that type tick quantity renders the instrument unreliable in lots of purposes that futures and inventory merchants want to switch from these markets to identify foreign money buying and selling.

Although the state of affairs with tick quantity improved drastically in comparison with a number of years in the past, it would take some extra time for the Foreign exchange tick quantity to turn out to be actually constant and significant as a knowledge supply for severe technical or sentiment evaluation.

If you wish to share your opinion on how actual buying and selling quantity might be estimated in spot international trade market, please go to our forum for a dialogue.

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