Thread: Volume from FX futures, price action from Spot FX?

Hello there,

Has anyone been trading the spot fx, but been utilizing volume as indior from futures market?

Or is trading both markets and can tell if there are some significant drawbacks for this method? Just as I tracked charts of both markets on a daily time frame (as I cant loe free futures intraday providers), they looked very similar and probably the volume at futures fx may be incorporated into spot fx.


Thanks.

They may appear different markets.

Some of the largest, market-moving orders will be on Spot, on the OTC market.

Obviously Position FX volume will be much greater than CME Futures vol.

Originally Posted by ;

Hello there, Has anybody been trading the spot fx, but been utilizing quantity as indior out of futures market? Or is trading both markets and will tell whether there are some substantial drawbacks with this method? As much as I tracked charts of the markets on a daily time frame (as I cant loe free futures intraday suppliers ), they seemed very similar and most likely the quantity at futures fx could be incorporated into spot fx. Thanks.

There's been a disagreement about that. Emeraldeyes is quite correct. They are different creatures. There has been a few studies floating about, and it's been discovered that Tick data is a suitable proxy for quantity. In doing research I have discovered that Commercial traders in the futures market often hedge these positions from the spot FX. Equipped with that understanding, I figured that one of these can possibly be an early indior for the other. But which one? So, which one is leading the price discovery process? I eventually I ran to this paper. From their sample, they came to the end that spot will direct futures in the price discovery process. So I came to a personal opinion that (for me) I could stop trying to utilize futures volume to analyze the spot forex, and if ticks are an acceptable proxy for quantity, I'll just work with what I got. (Hurry data) and keep my quantity studies of Future restricted to the COT report. That is only my opinion; I supplied a copy of that paper. If nothing else it could give you enough information to form an impression of your own....................................
https://forexintuitive.com/attachmen...8182281446.pdf

Thank you for replies. Some interesting ideas in the pdf as well

You can try adding the daily high volume lines on the chart on your spot broker's chart and you'll see that it does help somewhat. Although they are two distinct markets, the high volume places are very liquid and as such might offer valuable information (I usehttp://trading-evolution.com/forum/portal.php to gather the data). It's not an specific science.

Mzvega, thanks for the pdf, I will take a peek.

Hi Bug,
How can the large volume lines do the job. . .does the is calculated by it from the day???

Hi there

yes it does,there's 0.8 correlation between both.

Great fortune.

Originally Posted by ;

quote Theres always been a disagreement about that. Emeraldeyes is quite correct. They are different creatures. There's been a couple of studies floating about, and it has been found that Tick information is a suitable proxy for volume. In doing research I have found that traders in the futures market regularly hedge these positions in the spot FX. I figured that one of these can be an early indior for the other. But which one? So, which one is top the price discovery procedure? I finally I ran to...

Thanks a lot for the provided information! Like I used to wonder about that for quite some time, I find it to be quite useful. Could you discuss what source/s you use for the tick information? Additionally, do you think(I see that from petefaders' threads on babypips) that there are brokers that offer reliable/similar tick information to eSignal or some other reliable information suppliers?

Originally Posted by ;

quote Thanks a lot for your supplied information! I find it to be quite helpful, as I used to wonder about that for quite a while. Could you share what source/s you use for the tick information? Additionally, do you believe (I read that from petefaders' threads on babypips) that there are brokers that offer reliable/similar tick information to eSignal or some other reliable data suppliers?

I've little if any need for any Tick Data. You have to ask yourself exactly what is it you are trying to measure?
Many people believe the quantity of ticks somehow relates to quantity of trades or quantity of contracts. They often take the word Volume and use it interchangeably with the word Demand to imply exactly the identical thing.

The quantity of trades isn't a direct indiion of true Demand.
The kind of requirement that moves the market, is created from traders willing to maintain their positions overnight.

Lets say that you have 100 traders all enter the market creating High quantity of activity intraday.
98 of those traders are buyers, and just 2 are vendors, combined you have a high volume of activity.
Does that mean if you have greater quantity of buyers intraday that prices will go higher? No.
In case 98 of those traders (buyers) will exit the market prior to the close, there's absolutely no real buying requirement generated that will cause the market to go higher.
If the two vendors are holding their positions past the close, the only actual demand created is promoting demand. The demand is determined by both sellers still holding.

Volume isn't a direct indiion of true Demand.
High quantity = Liquidity (not real Demand)
the term Volume isn't synonymous with the word Demand
Intraday traders (day traders) provide liquidity, and have little to do with real Demand

For me in the end of the day I have to ask myself, Am I using the correct Data for the question being asked?
Volume = activity
However, the question I seek relates to Demand.

How much of this activity includes real demand created by traders willing to maintain their positions overnight? Volume does not fix the requisite equation.
For me Volume info doesn't answer the Demand question being asked.

For a trader I am considering measuring Demand. Who where prices are being used is of interest to me. Traders with the intent of holding positions overnight, with the maximum skin from the game, operate in areas most advantageous to them. The exact same high volume places most valued by intraday traders without a skin in the sport, who finally end the day flat, making zero demand.

And since quantity isn't a direct indiion of true demand, it has little if any value to me as a spot forex trader. IMO, provide demand moves the market, not quantity (activity)

I am surprised after searching around that nobody has done an indior that pulls the futures information from someplace such as the MICEX and plots the the real time prices and volume on your MT4 Platform. It's a job for our russian counterparts.