Stupid Question

[mohsinqureshii 10]

I know it is a stupid question but no one had answered me this question in couple of sentences yet about this and this question arises in newbie.

 

How much volume come into the forex market when it moves to one tick - e.g. Let's talk about Euro/USD - If the price of euro moves to 1.2910 to 1.2911 - How much volume of buying has came into the market to move it to one tick.

 

Is there any specific mechanism for that ?

[SIUYA 11]

have you ever purchased or sold right at the top or bottom of a move?

If so how much volume did you trade there?

There in lies an answer.

[mohsinqureshii 10]

have you ever purchased or sold right at the top or bottom of a move?

If so how much volume did you trade there?

There in lies an answer.

 

 

I didn't got your question - Could you please elaborate.

[SIUYA 11]

it was designed to make you think....and there is no such thing as a stupid question.

 

Basically it takes whatever minimum volume it requires to record a trade tick.

In futures it would be one contract.

In FX it depends on your broker. They may record a trade when no one else does, and it may be on very small volume...hence my reference to asking have you ever bought a top or sold the bottom as a retail trader. I know I have for various moves.

[karoshiman 10]

it was designed to make you think....and there is no such thing as a stupid question.

 

Basically it takes whatever minimum volume it requires to record a trade tick.

In futures it would be one contract.

In FX it depends on your broker. They may record a trade when no one else does, and it may be on very small volume...hence my reference to asking have you ever bought a top or sold the bottom as a retail trader. I know I have for various moves.

 

 

In spot forex there does not even have to be volume at all to record a tick. All is needed is a new bid/ask price from the bank (or whatever institution) to which your broker is connected.

[SIUYA 11]

karoshiman - if that is true then I have learnt a new thing....hence there is never a stupid question

 

coming from equities I have always assumed it to be exactly the same thing. It needs a trade to be recorded, and given the volume in FX and my trading style I have never needed to worry about it.

I have also never seen it described as you say, everything I have seen implies that it requires a trade to be recorded. (assuming we are talking about the ECN market and not just swaps with a fx broker who may or may not transact with anyone but themselves and never record trades except in house)

 

In equities you can have someone bidding 1.2910, asking 1.2911, and no trades occurring there, and hence no recorded volume.

If say this was on a high point, and the next trade is 1.2908, then that is what would show as the high trade in historical charts. I have never seen it any other way.

 

If that is true that bids and asks and not trades are recorded, then the answer to the original question is theoretically zero....or is it the same answer - the minimum that is required to be on a bid or offer. Or does it again depend on the broker/data provider and how they recorded it, which is why different brokers charts have different ticks recorded?

 

interesting, can you show this is how its recorded? thanks.

[karoshiman 10]

karoshiman - if that is true then I have learnt a new thing....hence there is never a stupid question

 

coming from equities I have always assumed it to be exactly the same thing. It needs a trade to be recorded, and given the volume in FX and my trading style I have never needed to worry about it.

I have also never seen it described as you say, everything I have seen implies that it requires a trade to be recorded. (assuming we are talking about the ECN market and not just swaps with a fx broker who may or may not transact with anyone but themselves and never record trades except in house)

 

In equities you can have someone bidding 1.2910, asking 1.2911, and no trades occurring there, and hence no recorded volume.

If say this was on a high point, and the next trade is 1.2908, then that is what would show as the high trade in historical charts. I have never seen it any other way.

 

If that is true that bids and asks and not trades are recorded, then the answer to the original question is theoretically zero....or is it the same answer - the minimum that is required to be on a bid or offer. Or does it again depend on the broker/data provider and how they recorded it, which is why different brokers charts have different ticks recorded?

 

interesting, can you show this is how its recorded? thanks.

 

 

Well, I'm not an expert in this. I've just read about this in several books and on websites and it makes sense to me.

 

In spot forex a "tick" is defined differently than in futures due to its decentralized character.

 

In the futures market a "tick" is defined like you mention it, as a transaction taking place, irrespective of the size of the transaction (with one traded contract being sufficient). So, by definition, there has to be a trade.

 

But in spot forex you have no central exchange, so a "tick" is defined as a change in price. That comes somewhat close to the above but it's not the same. I guess, in most cases there are somewhere in the world transactions in order for price to change, but theoretically there is no need for a trade to take place to change the price. So, the correct answer is indeed "theoretically zero".

 

The way your broker or data provider records it might also be crucial. Retail brokers have a spread on the prices of their data source (that's where they make their money if they have no commissions). So, differently negotiated spreads of different retail brokers lead to slightly different prices for retail clients. I do not know how ECN's record this. But they cannot deviate too much with their prices from what the large banks bid or offer. I guess, there must be some arbitrage mechanism be in place.

 

The surest thing is to ask your broker or data provider on how they do it exactly.

 

By the way, I do not trade forex anymore but only (non-forex) futures, actually only the ES. And my trading style makes use of volume information. So, for me, that is an argument against trading spot forex. But I've heard/read that some guys trade spot forex and use the corresponding futures volume as a substitute for actual volume. Don't know about their results though.

[karoshiman 10]

 

...

 

But in spot forex you have no central exchange, so a "tick" is defined as a change in price. That comes somewhat close to the above but it's not the same.

 

...

 

 

 

I'd like to correct my statement above in bold letters. A "tick" in spot forex and the futures market is different. Period.

 

You can have many ticks in the futures market at the same price. So, it's totally a different definition.

[SIUYA 11]

I had to laugh at myself.....

it is actually a two sided question when you think about it.

 

"How much volume come into the forex market when it moves to one tick - e.g. Let's talk about Euro/USD - If the price of euro moves to 1.2910 to 1.2911 - How much volume of buying has came into the market to move it to one tick."

 

If you are measuring and recording price ticks, then the answer is theoretically zero (or the minimum volume bid required if there is one)

If you are measuring and recording trades, then the answer is what ever trades at a price. If nothing trades it is only a market that has been made and nothing needs be recorded.

 

To actually tell how much volume is required might actually be irrelevant. You just need some one to make a market there to actually move the bids or asks....or is there a minimum required volume necessary....I dont know. Exchange traded market makers normally have minimums, can you supply a bid or an ask in FX without volume - I would think yes - then its up to your customers on how reliable you are to fill volume there. Dont really know now that i think about it. (luckily its been irrelevant to me so far - but a good question)