FX turnover is the sum value of all transactions performed in the foreign exchange market during any specific time although, generally, they are computed monthly.
When used in a technical analysis application, FX turnover measures the efficiency and magnitude of asset allocations while a growing turnover is a defining trait of an active bullish market.
In forex trading, the volume histogram is one of the most utilized indicators to measure FX turnover.
This construct helps plot trading volumes to designated periods although it is best optimized when used in conjunction with either bullish or bearish markets.
Trade volumes tend to outlast price moments. For example, if the price appreciates with a rising FX turnover that is then followed by a turnover drop-off then generally the price will continue to appreciate until the price has lost its momentum and begins to depreciate.
Why Does Tracking FX Turnover matter?
Many technical traders analyze FX turnover fluctuations on their charting solutions as a means of generating strong upcoming trend predictions.
Another important factor for FX turnover analysis includes open interest, which is the total value of all open positions at the end of a trading period.
Gauging variations of this index are the main emphasis, not observing absolute volume, because it enables traders to better understand the market sentiment of that asset to determine if their positions coincide with a long-term perspective.
Tick volume within a specific period are used for forex turnover estimations since these figures are inaccessible for official statistic authorities.
Turnovers are calculated in nominal terms of contracts. An example of this would be if a bank sells off $500,000 against the Yen and then uses that Yen to purchase U.S. dollars, the reported turnover would be $1 million due to the nominal terms of each contract.