What are the key components in making a good Trading decision?
- Open interest
- Price action.
But we would be discussing on volumes
Volumes can simply be defined as the amount of money traded in the forex market with a particular period mostly yearly.
If you have no idea what volume is, then I'll want you to take a look at how trading volume in forex market works.
So be sure that you understand these concepts first.
Trading volume in forex is simply a measure of how much currency is traded during each candlestick.
For those that are beginners, you probably have no idea how to determine how much currency is traded every day. This is mainly because forex trading is a decentralized market. You should know that there isn't a primary exchange that everyone transact through therefore there is no way to count how much currency is being traded at any one time. What you just see on your FX charts is only the volume that your broker sees.
You should not that The Foreign Exchange Market is a global decentralization market for the trading of the currencies. In term of volume of the trading, it is by far the largest market in the world. And from statistics year 2013 proved to be a year of growth for the forex market by way of volume trading according to the Bank of International Settlements. Volume traded per day grew to about $5.3 trillion up from 4 trillion the previous year.
High volume shows that a market is actively traded, and low volume is an indication that a market is less actively traded. Some assets tend to always have high volume, as they are popular among day traders and investors.
Let's discuss on buying and selling of volumes
The total volume is made up of Trading volume in buying and selling. Buying volume is the buying trades that are associated with the number of contracts, and selling volume is the number of contracts that were associated with selling trades.
Sometimes it is often confusing for traders that are just in the system because every trade requires both a buyer (a trader who buys a contract) and a seller (a trader who sells a contract).
So therefore we can distinguish buying volume from selling volume, based on whether a transaction occurs at the Bid price or Ask price.
The bid price is simply the highest current price an individual is stating they want to buy. The ask price is the minimum price someone is stating they want to sell. There is always a bid and ask price in an actively traded stock. The bid and ask is not constant it changes as traders buy and sell to each other, or decides about what their current bid and/or offer should be.
Note that when a transaction occurs at the bid price it is known as bid volume.
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