In order to be successful in the world of foreign exchange, one must know what is Forex volume. It is used to measure the movement in the market. The strength of the price of a particular currency depends on the total volume in a given time.
An individual can use Forex volume to monitor the moves that are happening in the market so that he won’t be left behind by other investors. An investor must know that significant moves come normally as a spike in which the volume is higher than usual. By doing this, he can readily prepare for any sudden trend movements in the market. In addition, an investor can identify periods in which there is a calm range or a consolidation.
Forex volume is important because it can tell the amount of trade that is happening in a particular time. For example, a high amount of trade would mean that there are a lot buyers and sellers that agreed on a fixed amount. This indicates that the session is closed because there has been an agreement between the buyers and the sellers. But if the volume is low, there’s no fixed price that was agreed upon. As a result, few investors or companies are engage in the trade. Sometimes, a low volume might not give the right prices of a particular product. In addition, there is a great number of unpredictability in the market because of false information signaled by a low volume. This period is not good for investors so trading in this time is not advisable. In order to avoid such dilemma, an investor must identify the time critical for trading.
Forex volume indicators are different from equities volume indicators. In equity volume, one volume is equal to one equity share traded. It means that if you sell a hundred shares and an investor buys the shares then it counts as a hundred equities volume. This is not the same for the Forex market. In the Forex market, it is difficult to track all of the agreements on a particular period. This means that it is measured by the number of price changes happened in a particular session. It means that a set of signed contracts can move a particular price one way or another.
Forex volume mustn’t be used as primary evidence. Instead, it can be used as confirmatory evidence that would support other evidences. In addition, it can be used as a tool to validate price changes in the market. An example where volume supports a particular change is when there is not enough volume activity in the market. In this way, it can serve as a sign of a weak trend where there are few commitments. If there is a gradual increase in the Forex volume, then there is a possibility that changes in prices are on the way. Hence, a movement of prices during a volume increase indicates that there is a possible action soon.