The majority of indicators and expert advisors that analyze currency pairs or trade them rely on tick volume. In every Metatrader platform, tick volume is calculated based on the number of price updates (ticks) made during an individual bar or candle formation. Initially, it appears that it is a good approximation to real volume. Still, in actuality, it is not always accurate enough to simulate the actual volume for a given FX pair.
First, the tick volume principle is flawed – one tick (price update) can be caused by either a small trade or a very large trade-either will not be considered in the tick volume, which will only raise one tick. Furthermore, large trades may take place within a broker’s current price
spread, which will not produce a tick. Secondly, the data feed of the broker plays a large role in determining tick volume values. In the forex market, brokers use multiple data feeds depending on the liquidity providers they use. In turn, this causes a discrepancy between what tick volume shows at one and another broker. Sometimes, this discrepancy is quite significant.
Unlike the foreign exchange market, where there is no real volume information, retail traders can find a reasonable estimate of this volume by examining the tick volume. Of course, the volume of ticks at different brokers can vary owing to different policies. However, the general trends of this volume typically hold across brokers. Furthermore, tick volume is even correlated with forex futures volume.
The following are examples of EUR/USD tick volume discrepancies at two online brokers and the EUR futures contracts (continuous).
This graph illustrates the excess tick volume for the EUR/USD weekly chart. A few volumes are highlighted in red to enhance clarity:
In the following example, red lines show the same volume values on EUR/USD weekly charts during the same period.
It appears that the volume of ticks on the future market is largely unrelated to the volume of real volumes. Of course, there would not be a perfect correlation between spot and futures markets, but it would be an average correlation. TradingView offers a weekly chart for EUR futures (6E) as well.
You have probably noticed that tick volumes sometimes don’t hold as they change among brokers. Additionally, a volume change (the volume at bar N is higher than the volume at bar N-1) is vital for operating such popular indicators as better volume and volume suite.
In many applications for shares and futures, traders would like to transfer trading from these markets to spot currency trading. But the numerous discrepancies between the data feeds that form tick volume renders the tool unreliable. Thus, despite the vast improvement in tick data compared with several years ago, it might take some time for forex tick data to become truly consistently and meaningful as a data source for serious technical and sentiment analysis.