Behind - FX VOLUMES

This article is a supplemental information update on our main Hub page: ' MegaTrade101 ' on the recent volumes and market turnovers on the Foreign Exchange Market. As we all know that the total number of investors are the driving force in any financial market and provides the liquidity as well as the momentum in this volatile market. As changes do occur when sudden changes in volume also affects the behavior of the market and its conditions.

As the end of the month have approached and the beginning of the new month of September has have a familiar direction less movement in most of the foreign currency with the exception of the precious metals like GOLD. As our previous Hub page on ' Gold - The Currency of Last Resort ' the cash capital flow of investment have steadily been flowing on the precious metal specially this 3rd quarter of the year. As prices have hoovered close to thousand dollar mark just this 1st week of September. So it was obvious that the money flow on liquid and solid investmemnts on the yellowis metal have made a considerable gain on those who have previously taken some positions while it was consolidating on the mid-price levels of USD 940.00 / troy oz.

The flow of investors can be measured in the relative volume & open interest report submitted by the Chicago Mercantile Exchange at the end o f the trading week. The information derived from this report is only part and partial of the overall, but the actual sentiments can be summarized to a close price relationship and its directional movement. As most portfolio manager, hedge funds and other instutional participants in the Foreign Exchange, commodities and Stock market may well a declining volumes and open interest even as an after effect of the financial crisis and the recession. From the Asian country such as the Chinese Composite Index, the Eurostox 50, Tokyo, the European and the US markets have resulted in the direction of the downturn as sentiments of a questionable recovery is still in the air.

Sometimes when it was overwhelmingly implied on the news and over empasized by the market; it moves ahead of the crowd of investors as a matter of anticipating that the markets may react negatively specially for the value of the US Dollar. As the depreciating World's Reserve currency has gone down in a very orderly fashion as most analyst have said in their reports. but there is no denying that it has gone done extremely low.

However, as the past weeks have been a not so good stock performance as the ' September Effect ' weighs heavy on the market has shown that most of these fund managers and professional investors have made some re-assessments and made some position adjusting between the closing of August and the opening week of September as it is drawing near the closing of the third quarter of the year even for the favored Foreign exchange market.

Not that the FX market is drying up but it is the fact the overall market conditions are affecting the investors. As one of our hub page co-authors wrote on : An FX Investor & Traders Mindset by ITREX which was more in line with how the investors are viewing the foreign exchange markets.

The psychology that the month of September is negative for Stocks in general has also affected the FX market considerably as shown on the charts on the right hand side of this article.However, as matter of additional information, the concern of most traders in a month ending day and as the new month opened, traders re-adjusts their positions in the market. Although, it is not highlighted in the news reports much, but it is a pattern that most rollover positions as made and would reflect specially in the FX market that most investors shifts the liquidity from risk to growth investments. Here are some detailed research numbers thatmay only prove tp be helpful as additional information.

According to the recent report by the Reserve Bank of Australia, the Foreign Exchange turnover volumes has decreased considerably in every major category by more than 20% in the equivalent dollar amount of 2.5 Trillion dollars between the months from October of 2008 to April of 2009. This is the lowest levels since 2 years where the United States and London registered the highest percentage downfall overall. this is to no surprise as the economic and financial crisis basically erupted in the United States and spilled over to the rest of the world.

The report was based on six of the major trading FX markets namely: London (Europe), United States, Canada,Japan, Singapore and Australia. And this also revealed that most investors have moved some or most of their investments by mid summer of 2008, to safe-haven countries with sound economic reports after the collapse of the bonds and stock markets in the United States. This movement or so called migration of funds obviously have been facilitated by the banks dealing in foreign exchange transactions so they would know how to sum-up the numbers as the report would show. The volumes of turnover and trasactions  would be well recorded as the ' VOLUMES ' by definition is simply the investors who drives the liquidity and momentum in the market place. Without it then there will be no confidence prevailing and would see price in a directionless and slow moving trends.

As of this writing, it is difficult to predict and speculate if and when the volumes would show some signs of renewed energy as it remains depressed with the curtailing efforts by the government on regulations and overblown leverage being used in the industry by the huge financial institutions. With that said, the FX market for retail investors has been the driving force supporting this decline and that any signs of improve economic conditions would also reflect an increase in volumes in the number transactions being made on a day to day basis.

So how would you perceive the foreign exchange trading as a whole without being able to monitor the volumes and open interest of the market. The relative correlation between these two are sufficient reason to augment trading information to improve ones trading skills and we can not simply ignore the importance of knowing this relationship as they affect the prices in the market.