Volume in Forex: What Tick Volume, VWAP and Volume Profile Can Really Tell You

Many technical-analysis books come from stock and futures markets, where every trade goes through a central exchange, so volume (the amount traded) is a real number everyone sees the same way. Spot forex has no central exchange, so the volume figure in MT5 is something different. This article explains what it counts, how to use it to compute VWAP and a volume profile, with a bar-by-bar worked example, and is honest about what these tools cannot do.

Forex has no central volume

Forex trades over the counter (OTC): deals are agreed directly between banks, liquidity providers, several matching platforms and brokers. Each one only sees the orders that pass through it, and nobody adds up the whole market in real time. (For the layers of the market, see FX market structure and liquidity.)

The volume data that does exist is fragmentary: the volume of currency futures traded on a futures exchange, for example, or the figures of a single platform. Each is a small slice of the whole market.

What tick volume in MT5 counts

Every bar in MT5 stores volume in two fields.

Field	Meaning	When it has a value
Tick volume	The number of ticks, i.e. how many times the price changed in that bar	Every symbol
Real volume	The amount actually traded, e.g. number of contracts	Only exchange-traded instruments where the broker supplies it

Most currency pairs and gold CFDs only have tick volume. The Volumes indicator in MT5 lets you choose Tick or Real. Choose Real on a currency pair and you will usually get zero.

Why two brokers get different tick volume:

• Each broker’s prices come from a different set of liquidity providers
• Some brokers filter or bundle very frequent price changes before sending them to clients
• Server times differ, so bars start and end at different moments

So is it usable at all? The reasoning is that when more people trade, the price is updated more often, so ticks come faster. Research comparing quote counts with real traded volume (for example, with currency futures volume) has generally found that the two rise and fall together, especially in their pattern across the hours of the day, but not one-for-one. The safe conclusion is that tick volume tells you when it is busy and when it is quiet within one feed. It doesn’t tell you how many millions changed hands, and it doesn’t tell you whether buyers or sellers were larger.

The clearest pattern is the time-of-day pattern: tick volume is low in the Asian morning, jumps at the London open, peaks in the London–New York overlap, and spikes into a single tall bar on news. Session times are in Forex market hours in Thai time.

What VWAP is

VWAP (Volume Weighted Average Price) is the average price weighted by volume, accumulated from a starting point (the anchor), usually the session start, and restarted each session.

VWAP = Σ(representative price × volume) ÷ Σ(volume)

When you compute it from candles, the usual representative price is the typical price = (High + Low + Close) ÷ 3. In forex, volume means tick volume, so the result is really “an average price weighted by activity”. Bars where price changed often carry a lot of weight. Quiet bars barely count.

The common bands around VWAP are ±1 and ±2 volume-weighted standard deviations (SD):

• SD = √[ Σ volume × (typical price − VWAP)² ÷ Σ volume ]

Besides the session VWAP there is the anchored VWAP, which starts from a point you choose, such as a news bar or a swing low. The formula is the same; only the start changes. Platforms disagree on when a session starts, so check in the settings when your line resets.

Worked example: VWAP bar by bar

Six hypothetical opening bars of an EURUSD session (made-up numbers computed with a script; the table is rounded but the math uses unrounded values).

Bar	High	Low	Close	Tick vol	Typical price	TP × Vol	Σ(TP × Vol)	Σ Vol	VWAP
1	1.0852	1.0840	1.0848	120	1.08467	130.160	130.160	120	1.08467
2	1.0856	1.0845	1.0853	150	1.08513	162.770	292.930	270	1.08493
3	1.0870	1.0850	1.0866	420	1.08620	456.204	749.134	690	1.08570
4	1.0875	1.0860	1.0862	380	1.08657	412.895	1,162.029	1,070	1.08601
5	1.0864	1.0851	1.0855	260	1.08567	282.273	1,444.303	1,330	1.08594
6	1.0860	1.0848	1.0858	190	1.08553	206.251	1,650.554	1,520	1.08589

Step by step:

1. Bar 3: typical price = (1.0870 + 1.0850 + 1.0866) ÷ 3 = 1.08620
2. Multiply by tick volume: 1.08620 × 420 = 456.204
3. Accumulate: 292.930 + 456.204 = 749.134, and cumulative volume 270 + 420 = 690
4. VWAP after bar 3 = 749.134 ÷ 690 = 1.08570
5. After bar 6: VWAP = 1,650.554 ÷ 1,520 = 1.08589

Compare that with the plain average of the six typical prices, 1.08563. VWAP is 2.6 pips higher because bars 3 and 4, the busiest (800 of the 1,520 ticks), traded at higher prices.

The SD band at the end of bar 6 is Σ volume × (TP − VWAP)² ÷ 1,520, square-rooted: 0.00058, or 5.8 pips.

• ±1 SD: 1.08531 to 1.08647
• ±2 SD: 1.08472 to 1.08706

If you build it yourself in Excel, keep three running totals: Σ(TP × V), Σ V and Σ(V × TP²). Then SD = √[ Σ(V × TP²) ÷ Σ V − VWAP² ] gives the same value.

Reading VWAP over one day

The figure below applies the same calculation to 48 thirty-minute bars covering a full day.

What the figure shows, which comes from the formula rather than from this particular market:

• The bands are very narrow early on. After the second bar the SD is only 0.7 pips, so price breaks ±2 SD easily in the morning. A “band break” early in the session means almost nothing
• Quiet hours carry little weight. From 04:00 to 14:00, ten hours, there are only 22.9% of the day’s ticks, while 19:00 to 04:00 has 52.4%. VWAP gets pulled toward New York prices
• Late in the day VWAP hardly moves. After 19:00 VWAP stays between 1.08588 and 1.08612, a range of just 2.4 pips, while price runs from its high of 1.08729 down to close at 1.08438. With a large cumulative volume, each new bar changes the average very little
• Touching +2 SD doesn’t mark a top. The 15:30 bar closed above +2 SD, yet price rose roughly another 7 pips before turning in the New York session, and the bars from 10:00 to 21:00 closed above VWAP 23 times in a row

How institutions actually use VWAP

In equities, VWAP is an execution benchmark. A fund that needs to buy a large amount of stock has a broker or algorithm work the order through the day, then measures whether its average price was better or worse than that day’s VWAP. A VWAP algorithm splits the order according to the usual volume pattern of each time of day, sending more in busy periods and less in quiet ones, so the average fill lands close to VWAP without pushing the price itself.

A measurement example: using the day from the table above, a fund manager buys 10 lots of EURUSD at an average of 1.0862, while VWAP is 1.08589.

• Difference = 1.0862 − 1.08589 = 3.1 pips worse than VWAP (for a buyer, a higher price is worse)
• One standard lot of EURUSD is worth 10 dollars per pip, so the extra cost = 3.1 × 10 × 10 = 310 dollars

In forex, the more common benchmarks are fixing prices such as the WM/Reuters fix around 16:00 London time (about 22:00 or 23:00 Thai time (UTC+7), depending on the season) and TWAP. VWAP algorithms are used too, but the volume behind them is that platform’s own data.

VWAP is a ruler, not a wall. Institutions use it to grade their own execution. Nobody has a job of pushing price back to it.

Price coming back across VWAP often has an arithmetic explanation: VWAP is the average of the same day’s prices, so price must spend much of the day around it anyway. Nobody needs to be waiting to buy at the line.

Volume profile, POC and the 70% value area

A volume profile stacks volume by price level instead of by time, giving a horizontal histogram of where trading was heaviest that day.

• POC (Point of Control): the price level with the most volume
• Value area: the range around the POC that holds about 70% of the day’s volume. Its top is the VAH and its bottom the VAL

The 70% comes from J. Peter Steidlmayer’s Market Profile, developed at the Chicago Board of Trade (CBOT) in the 1980s, chosen to approximate the ±1 SD range of a normal distribution, which covers about 68%. It isn’t a number proven to be optimal.

A simple way to build the value area:

1. Start at the POC row
2. Look at the adjacent rows above and below, and add whichever has more volume
3. Repeat until you hold at least 70% of total volume

Some programs add two rows at a time or use different row sizes, so results differ a little. With only candles, a program has to guess where within each bar the volume happened. The basic method spreads it evenly from the bar’s Low to its High. With tick data, each tick can be placed at the price where it actually occurred.

This figure uses the same day as the previous one, spreading each bar’s tick volume evenly across its range, in 1-pip rows.

The result: the POC is 1.0852 to 1.0853, and the value area is 1.0850 to 1.0867 (17 rows holding 72.6% of the day’s ticks, because the last row added took it past 70%). Three things to notice:

• The POC is not VWAP. End-of-day VWAP is 1.08588, about 6 pips from the POC. One is an average; the other is the thickest point
• Thick areas come from time spent. Price circled around 1.0850 to 1.0855 both in the morning and late in the day, so ticks piled up there. That doesn’t mean anyone was deliberately accumulating
• A large node can sit outside the value area. The rows from 1.0868 to 1.0870, where price stalled at the high, are as thick as rows inside the value area, yet fall outside the 70%

Volume-profile users often treat thick rows (HVN, high-volume nodes) as places where price may slow down, and thin rows (LVN, low-volume nodes) as places price may cross quickly. That is the same kind of reading as support and resistance zones (Support, resistance, supply and demand): it says what happened at a price before, not that it will happen again.

Gold: real volume in futures vs tick volume in CFDs

A gold CFD in MT5 has only that broker’s tick volume. Gold futures on an exchange such as COMEX have real volume, a contract count everyone sees the same way. (How the types of gold differ: Gold CFD, futures, spot and ETF.) Some traders therefore read the volume profile on futures and carry the levels over to the CFD. That works, but there are things to handle.

Issue	Futures	Gold CFD
Volume	Real contracts from the exchange	The broker’s tick volume
Price	The price of that contract month, usually different from spot by interest and time to expiry (the basis)	Based on the spot price plus the broker’s spread
Continuity	Volume moves to the next contract month as expiry approaches (the roll)	One continuous chart

So a POC at 2,000.0 on futures is not at 2,000.0 on the CFD. You need the gap between the two prices at the same moment and shift the level, and that gap drifts until expiry. During a roll, the old contract’s profile thins out unusually, so look at the most actively traded contract at the time. Real volume improves accuracy, but the “describes the past, doesn’t predict the future” limit stays exactly the same.

What it can and can’t do

It can:

• Show whether now is busy or quiet compared with the same time on other days, within one feed
• VWAP shows whether the current price is rich or cheap relative to the average traded since the session started
• A volume profile summarises where price spent the most time that day, as context for zones you already draw

It can’t:

• Tell you real money traded or which side was larger (tick volume has no direction)
• Give numbers you can compare across brokers. POC levels and VWAP values shift slightly from feed to feed
• Predict where price will bounce or return to. These levels describe data that has already happened

Combining it with risk management

• Use VWAP and the value area as context, not as stand-alone entries. If you do use them, write clear rules and test them first
• Don’t put a Stop loss exactly on VWAP or the POC. Allow for volatility, for example with ATR, then size the position from that distance (Position size from your Stop loss)
• During news, tick volume spikes and spreads widen, so VWAP and its bands jump. Don’t read that as a signal
• Early in the session the bands are unrealistically narrow. If your rules use the bands, wait until the session is well under way
• If you change broker or data source, retest any volume-based rule, because the underlying numbers change

Common mistakes

• Reading tick volume as money traded. It is the number of times that broker’s price changed, not lots or dollars
• Comparing volume across brokers or charts. Each feed has its own base. Only compare bars on the same chart
• Believing institutions defend VWAP. VWAP is a performance yardstick. Nobody has to push price back to it
• Using ±2 SD as a reversal point. On trend days, price can stay outside the band for a long time, like the figure where it touched +2 SD and kept rising
• Copying futures levels straight onto a CFD. Shift them by the price gap, and check which contract the volume is in
• Treating the POC as support that must hold. The POC shows where trading was heavy before. Price can always pass through