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Forex Trading Volume
A common harbinger of a change in foreign currency rates is an increase in Forex trading volume. Unlike with trading stocks on the NYSE or NASDAQ a Forex trader does not immediately see Forex Trading Volume. This is because Forex trading takes place around the globe. The major markets are not all open at the same time but Forex trading volume in London can give a clue as to what will happen in New York and then in Tokyo. Forex trading volume is largely a technical cue and useful indicator of changing market sentiment.
Many successful traders use Forex trading volume as an indicator of the strength of a trend or change in the market. In a market that is trading sideways there may be a sudden rise or fall in the price of one currency versus another. If that move is accompanied by a substantial increase in Forex trading volume it is more likely that the trader is seeing a new trend emerging. In case where Forex trading volume does not really change as prices change the implication is that the trader is not seeing a new market trend and that the market will soon correct itself. Used with other indicators of market reversals such as the Doji signal in candlestick trading, an increase in Forex trading volume can help traders make strong profits with a timely trade or two.
Just How Much Is Enough?
Just how much of a change in trading volume is enough to indicate a change in market direction? The issue for traders who use Forex trading volume as an indicator of true changes in market direction is just how much do you need to see to trust the indicator. The problem here