Real Forex Volume: The new kid on the trading block

AT TIMES, trading is an information arms race, where the traders with the best knowledge and the discipline to stick to their ideas tend to do better than those who trade on a whim.

With this in mind, traders may be interested to hear that FX brokers have started to share their trading volume in real time. Such information was previously only revealed on exchange-traded products, like shares.

Using examples from the stock markets, traders would use this data to establish whether the price trend of a share was being supported by the market, or whether it was simply being boosted by a small number of market participants.

Consider this classic example. A share might be rallying for a few weeks on the back of a strong earnings report. Initially, the rally would have been broad-based, with intuitional and private investors buying the company. But as the price of the share started to reach lofty levels, on the back of just a few market participants, the traders would get ready to short the share. The same strategy would be used when trying to point a low.

In today’s FX worlds, the concept becomes even more complex. The most sophisticated brokers will break down the actual allocation between the buy-and-sell orders being executed on the market, in real time. This offers an even more in-depth take on the market.

Alejandro Zambrano is a currency strategy analyst at DailyFX.com.