Volume in forex trading refers to the number of currency units traded over a specific time period. While forex is a decentralised market and lacks a central exchange, volume still plays a crucial role in identifying market participation, confirming trends, and spotting potential reversals.

Key Takeaways

• Forex volume measures the level of trading activity, not the number of contracts
• Volume is a leading indicator of liquidity and institutional involvement
• Although exact volume is unavailable in spot forex, brokers provide tick volume as a proxy
• Volume analysis helps confirm breakouts, divergences, and trend strength
• Professional traders combine volume with price action for reliable setups

Understanding Volume in Forex

1. Tick Volume vs Real Volume

• Tick Volume: Measures the number of price changes (ticks) during a given time period. It’s the most commonly used proxy in forex.
• Real Volume: Only available in futures or broker-specific ECN platforms like cTrader. It shows the actual number of units traded.

2. How Tick Volume Reflects Market Activity

While not exact, studies have shown tick volume strongly correlates with real volume in highly liquid forex pairs like EUR/USD and GBP/USD.

3. Volume Indicators for Forex

Indicator	Function
Volume (Tick)	Displays bar-by-bar tick activity on charts
On-Balance Volume (OBV)	Measures buying/selling pressure via volume-price flow
Money Flow Index (MFI)	Combines volume and RSI to spot overbought/oversold zones
Accumulation/Distribution Line	Tracks volume-based divergences with price
Volume Profile (MT4 plugins or cTrader)	Visualises volume at price levels rather than over time

Practical Application of Volume in Forex

1. Confirming Breakouts

A true breakout above resistance or below support should be accompanied by rising volume. Weak volume may signal a false breakout or trap.

2. Spotting Divergences

If price is making higher highs but volume is falling, this signals potential exhaustion and a reversal.

3. Identifying Ranges vs Trends

Low volume periods often suggest consolidation or accumulation. Sudden volume spikes indicate the beginning of a new move.

4. Trading With Volume and Price Action

Volume should always be interpreted alongside candlestick patterns and market structure for a higher probability setup.

Case Study: How Traders Use Volume Effectively

Fatima, a student from the Forex Course, struggled with false breakouts. After learning to use tick volume and confirm every breakout with a volume spike and price action pattern, her win rate improved by 27%. She focused mainly on EUR/USD and GBP/JPY during London hours, avoiding low-volume setups entirely.

Benefits of Volume Analysis

• Offers deeper insight into the strength of price moves
• Confirms or contradicts trend direction
• Helps identify market phases: accumulation, breakout, or exhaustion
• Works across timeframes and pairs when combined with structure

Limitations

• Tick volume is an approximation, not true volume
• No universal forex volume feed exists
• Less reliable during holidays, weekends, or low-liquidity sessions

Frequently Asked Questions

What is volume in forex trading?

It refers to the level of activity or trading interest in a currency pair over a specific period. In spot forex, it’s often represented by tick volume.

Why is volume important in forex?

It helps confirm the strength of trends, validate breakouts, and identify potential reversals when combined with price action.

What’s the difference between tick volume and real volume?

Tick volume measures the number of price changes, while real volume counts the actual number of units traded. Real volume is available in futures or ECN platforms.

Can volume analysis improve my trading?

Yes. It can filter out false breakouts, confirm trade setups, and enhance decision-making when integrated with a clear strategy.

Which volume indicators work best in forex?

Tick volume, OBV, and Money Flow Index are popular. Volume Profile is powerful for identifying price levels of institutional interest.