Volfix program is designed for visual analysis of the market on the basis of the accumulation of volumes. The basic idea is put by Peter Steidlmayer in his theory of Market profile. The logic of the analysis is that the market can not just move from one price to another. Someone has to initiate this movement. You know perfectly well, that there
are big players in the market, that mostly move the price. Our goal is quite simple: to detect traces of these major players, to understand what they are doing (buying or selling), analyzing the excessive volumes, and open positions in the same direction as the major players.
With Volfix program and its components, you can do it.
If you trade FOREX. Forex Market, as well as other markets are controlled by big players. Ими They may be central banks, hedge funds, large multinational companies that operate in different countries. Before we talk about FOREX – you need to understand that each currency has a guide. This is an absolute analog of the currency pair at the Chicago Mercantile Exchange (CME). For example, EUR / USD pair has a ticker 6E, CAD / USD pair has a ticker 6C etc.
How much the guide leads a currency pair and whether the futures trading on the CME is the guide? First I’ll show you a comparison of chart of the currency pair of EUR / USD with analogue futures contract on the CME 6E (EUR / USD).
White graph – a graph of EUR / USD, blue – a graph of 6E.
Since Forex is a decentralized global curb market, respectively there’re no clear criteria for the formation of foreign exchange rates. FOREX operates through a network of financial institutions, each of which may affect the price of the currency as well as its volume. We can’t clearly track the volumes. They will be not correct.
However, most of the big players are also trading on the CME, buying and selling futures contracts, options and other financial instruments. For many, it is more reliable, because the market is governed by laws and regulations, as well as giving more opportunities to trade. And since, according to the rules of the Exchange, all transactions are recorded at the exchange, we can see the volume and see the big players.
Why do the volumes on the CME market work? Because, as we have seen from the graph – the price is very close, and if at CME the price will differ even slightly, arbitrage traders will get it back. If someone tries to open a strong position in the FOREX – the same position will be opened at the CME and vice versa. Traders-arbitrageurs are now working very well.
Thus, the analysis of the volume on the FOREX won’t give us any good information, when the analysis of volumes at the CME will give us a good information, that shows big deals.
I already showed you free effective patterns based on volumes (If not, register) and they do work pretty well.
Also, the volumetric analysis works intra-day very well.
Thus, we have shown you that the Forex market can be well analyzed by volume. In the next letter we will tell you how to work with graphics Cluster Profile and how to configure it properly.