Hi Anna I purchased your book ‘Forex For Beginners’ which I thought was really useful. I am now working my way through ‘A Complete Guide to Volume Price Analysis’, only up to Page 46 as yet – but I am still really impressed. At the moment I am using a demo account on MT5. The only thing I am confused about at the moment is which Volume to use. You mention the Tick Volume, so I take it to be this – on my screen it is all in one colour (green). There is another Volume indicator as well though, which shows red or green line for volume. Should this be taken into account or not? Thank you in advance for your time,
Hi – many thanks for your email and also for your very kind comments which are much appreciated, and I’m just to delighted that you are finding the books useful and enjoyable.
With regard to the volume to use, the platform I am most familiar with is MT4 rather than MT5, and here the indicator I use is called Volumes. In the standard format it paints each volume bar either red or green which can be confusing, as this has nothing to do with whether the volume represents buying or selling, but simply the relationship between the bars themselves. So for example, if the current bar is higher than the previous bar it paints is green, and if it lower then the previous bar it paints it red, which can be confusing. What I find works well is to change the default color so that all volume bars are the same, then all we are comparing is the various changes in volume and not confused with the different colors. I’m not sure on MT5 if the indicator is the same, but suspect it is, although there may be other volume indicators as MT5 covers broader markets with MetaQuotes now merging the two platforms closer together following the release of build 600.
The choice of volume indicators is a personal one, but as always the key point is to always compare like with like – apples with apples. So as long as you are using the same volume indicator for your analysis, either is fine. As I’m sure you know in the forex market there is no central exchange and the volumes indicator is based on tick activity in terms of price changes. In other words tick activity as a proxy for volume. Some forex brokers are now starting to introduce volume indicators to represent ‘real’ volumes based on their customers trading activity. However, given that the central banks are the market makers in FX, I would suggest this is of little value, and the Volumes indicator is therefore far more representative of what is really happening in terms of order flow, than retail traders. Indeed one could argue that retail traders might be a good ‘inverse’ indicator of which way to trade!
When I first started trading using volume, I spent several weeks testing, checking and then cross referencing all the various volume data feeds, trying to reconcile one with another. After a time, you soon appreciate that there is always a difference from one data vendor to another, or from one broker feed to another. The data is simply handled in different ways through the different feeds. What is important as I said above is that you use the same one, and compare like with like, otherwise you will drive yourself mad! It’s human nature – we all do it in a search for precision, but volume price analysis is an art rather than a science, and we have to accept that we are in an imperfect world!
Hope the above helps and many thanks once again and wishing you every success in your trading,- kind regards – Anna
By Anna Coulling