Question: What is "Depth of Market" on MT5 (MetaTrader5)? How to use that tool?
- What is “Depth of Market” on MT5 (MetaTrader5)?
- How to open Depth of Market Window?
- Why traders cannot see the Total Volume of the Forex market?
- Trading Volume in case of Stock Market
- Trading Volume in case of Forex Market
- Why you can’t see the total volume of Forex
- Volume isn’t the everything in Forex
- Highest Volume – EUR/USD, USD/JPY and GBP/USD
- When is the Best Time to trade Forex?
- Conclusion
What is “Depth of Market” on MT5 (MetaTrader5)?
“Depth of Market”(or DoM) is a trading tool to see the market liquidity, as in the depth of the liquidity available in the certain financial market.
By referring to the “Depth of Market” window, you can see how much order(liquidity) is available in the market at which price.
It is a useful tool to know which currency at what time is more liquidated, and for trading “Scalping” using the “Depth of Market” window.
“Market Liquidity” is a very important aspect to know for traders, because if there is no enough liquidity available in the market to match your orders, your orders won’t be executed or get slippage to find the next available price.
How to open Depth of Market Window?
To open the “Depth of Market” board on MT5, please right click on the “Market Watch” window and select “Depth of Market” as below.
Then, you will see the market liquidity of the selected symbol in the “Depth of Market” board.
The “Depth of Market” board looks like below.
The list of prices in red is the “Ask” prices, and the list of prices in blue are the “Bid” prices.
The “Volume” column shows the available liquidity in the market.
10.00 volume means there is 10 standard lots of available liquidity in the market.
Of course, if your order is more than the available volume, your order will get slippage or won’t be executed.
It is very normal that there are only 10 – 30 lots of liquidity available in the market at each moment, for the retail Forex market.
For the list of MT5 brokers, please visit the page below.
Why traders cannot see the Total Volume of the Forex market?
In order to make a profit with Forex, you need to buy when it is cheap and sell when it is expensive.
Therefore, even if you trade during a time when there is almost no price movement and volatility is low, you can rarely make a profit.
Even relatively high volume currencies such as the pound and the euro may not make any profit at all times of the day.
On the contrary, it means that you can make a profit if you trade during the time when the trading volume is high, that is, the time when the trading volume is high.
In fact, there are many traders who invest in stocks based on their trading volume.
However, there are some questions that arise.
- How can I check the total volume of the FX market?
- Is there any volume in Forex in the first place?
- Can I definitely win in Forex if it is done according to the volume?
From the conclusion, FX also has volume, but it doesn’t mean the volume provided by a broker which you see on the platform because it is only a small part of the largest financial market in the world.
However, unlike stock investment, which you can check immediately by looking at the chart, you need to know the trick to check the volume of Forex.
If you keep this knack, you will be able to grasp the volume of Forex and use it for trading.
Please refer to the following page for the characteristics and trading methods of the EUR/USD, which has the largest trading volume in the world.
Trade EURUSD with the Highest Volume
Trading Volume in case of Stock Market
By knowing the trading volume, it is possible to grasp the current market trends, but what exactly is the trading volume in the first place?
You may not understand what it means to be volume.
The stock trading volume means the number and amount of stocks traded.
A large volume means a large volume of transactions, while a low volume means that the volume of transactions is low and declining.
It’s important to note that high volume doesn’t necessarily mean it’s good for equity companies.
Because in the world of stocks, stocks are bought and also sold.
Just because there are many transactions that does not mean that they are being bought.
Since the sale of stocks is also included in the transaction, the stock price may plummet at the timing when the trading volume increases.
Of course, as news that is positive for companies flows and more people buy stocks, the volume will increase accordingly, and the stock price will rise as it catches up.
In this way, volume means the transaction volume itself, so a large volume does not always work positively for a corporation.
What’s the difference of Stock and Forex markets?
Trading Volume in case of Forex Market
The same is true for the foreign exchange market, but it’s not just about rising exchange rates.
For example, when the USD is bought, the USD strengthens, but the strong USD works against the US, which has a lot of exports.
Therefore, for a company that makes a profit from exports, it will be a factor that deteriorates its business performance.
On the contrary, if the USD depreciates, it will be advantageous for exporters, but it will be disadvantageous for importers.
The value of money does not mean that you should raise it.
Sometimes it helps if the value of the money goes down.
And when the volume increases and the trading becomes active, the value of money moves greatly.
The foreign exchange market is constantly moving 24 hours a day, but not always.
Sometimes it’s stagnant and sometimes it doesn’t move at all.
If you trade Forex when the range of such price movements is narrow and volatility is low, it is unlikely that you will make a profit.
On the contrary, you can lose your mind many times and incur huge losses.
However, as trading volume increases and trading becomes more active, the exchange rate will jump significantly.
If you enter at this time and make a payment after the exchange rate advances as expected, you will be able to earn efficiently in a short period of time.
In this way, the volume is very useful information to increase the winning percentage of Forex.
However, unlike stock investment, in the world of Forex, it is not possible to grasp the whole picture of the trading volume.
International Forex market sessions
Why you can’t see the total volume of Forex
The volume is familiar with stock investment, but when it comes to Forex, the volume is hardly grasped, and even a professional trader does not know accurate information about the volume of the foreign exchange market.
Why can’t investors see the actual volume in the Forex market?
If you can know the trading volume, you can trade at the best timing.
For that reason, it is coveted information that every trader wants to know, but it is almost impossible to see it with Forex.
This is because, unlike the stock market, the trading volume of the foreign exchange market is too huge.
Of course, the target of the foreign exchange market is money.
The amount is overwhelmingly different compared to the stocks that are issued in small numbers.
Even major fiat currencies such as the Japanese yen, the US dollar, the British pound and the Euro cannot be fully grasped.
Of course, you can know the volume of some brokers just like you refer to the market depth window, but it will be of little use.
In order to know the volume of the foreign exchange market, we need to know the volume of all traders in the world and brokers.
And, as a matter of fact, it is impossible to know the volume of all brokers and traders.
This is because many people who trade Forex use over-the-counter Forex instead of market trading.
Since you are trading outside the market, you can hardly get the whole picture even if you look it up.
For the time being, it is possible to know the volume on the net by referring to the market depth window, but such information is only a small part of the volume.
Volume isn’t the everything in Forex
The exchange rate is easier to move when the volume of transactions increases and the volume is high than when the volume is low.
Even if you can trade even during the time when the volume is high, it isn’t the case that you can definitely win.
In the first place, the volume is the volume of transactions, and the contents are unclear.
Even if there is a lot of volume, there is no difference in losing money if you don’t plan well beforehand.
If the volume is 100, the buy volume is 50, and the sell volume is 50, the volume is certainly 100, but the exchange rate will not move because the sell and buy volumes are in equilibrium.
Nevertheless, if you blindly believe that the volume is high and make an entry, you will definitely fail.
On the other hand, if the buy-sell ratio is 8: 2, the rate may rise because there are overwhelmingly more buys.
However, if the volume itself is low, the rate will move a little and not only will you not be able to make a lot of profits, but the market may soon reverse and you may lose money.
Knowing the volume is certainly useful for trading, but it’s not good to believe too much, so it should be kept as a reference only.
Which is the Best Currency Pair to trade?
Highest Volume – EUR/USD, USD/JPY and GBP/USD
Forex does not give you a complete picture of the volume, but you can see the currency pair with the highest volume.
First of all, the overwhelmingly high volume currency is definitely the US dollar.
The US dollar is the world’s key currency and is used for transactions around the world.
Some countries even use the US dollar instead of their own currency.
The US dollar, which is needed by the world, can be called the most traded currency in the world, of course.
Basically, if you want to choose a currency with a large volume, there is no mistake if you choose mainly the US dollar.
However, please note that the transaction volume will differ for each currency pair.
Even if you choose US dollars, the transaction volume differs depending on the currency pair.
And the most traded currency pair is the EUR/USD pair.
The Euro, like the US dollar, is a currency used around the world.
Especially, since it is a currency used in the European area, the transaction volume is very large.
The Euro is often used as an alternative currency to the US dollar, and when negative information comes out in the United States, the US dollar tends to be sold and the Euro tends to be bought.
Due to such circumstances, the trading volume is overwhelmingly large, and the EUR/USD is often selected as a popular currency pair by Forex traders.
The second most popular and most traded currency pair after the EUR/USD is the USD/JPY.
Japan is a very reliable economically advanced country in the world.
The credibility of the JPY in the international community is extremely high, and it has attracted a great deal of attention as it is said to be an “emergency JPY purchase.”
It is said that the act of North Korea hitting a missile should be a negative factor for Japan, but the reason why the JPY strengthens is that the characteristic of emergency JPY buying is too pervasive.
The USD/JPY is a currency pair with a large volume of transactions and high volatility even in the world, and it is a currency pair that is suitable for Forex trading.
The next highest volume currency pair after the EUR/USD and the USD/JPY is the GBP/USD.
The UK is a financial powerhouse, and the trading volume of the pound is very large, and there are many Forex traders who trade mainly GBP pairs.
Its volatility is so high that it wouldn’t be a dream to make a lot of money in less than an hour if you think about it.
However, the pound is also famous for being too volatile and nicknamed the “murder currency.”
If the price movements are so volatile that you can’t keep up with the intensity, you’ll quickly lose money and lose your assets.
It doesn’t mean that you shouldn’t trade GBP pairs, but GBP pairs are very risky for beginners and intermediates, so it is wise not to trade GBP pairs unless you are a professional or experienced trader.
Which is the Best Currency Pair to trade?
When is the Best Time to trade Forex?
Choosing a currency pair with a high volume makes it easier for traders to target price movements.
Even if you don’t know the detailed trading volume, if you always focus on the currency pairs with high trading volume, you will not see that you cannot make a profit due to the low trading volume.
However, no matter how popular a currency pair is, it doesn’t always run 24 hours a day.
Sometimes the market is stagnant and sometimes it doesn’t move.
When should you trade forex trading then?
When trading on weekdays except for Saturdays and Sundays, it is said that the time when the Tokyo market, London market, and New York market are open is the time when the trading volume increases most.
Immediately after the market opens, the volume tends to increase and the volatility tends to increase, probably because of the high level of attention.
In particular, the time when the New York market opens is not only in the United States, but also because it attracts attention from people all over the world, from Japan to Europe, and the exchange rate is more volatile than other times.
Some Forex traders don’t even look at the Tokyo and London markets and only trade for the first two hours when the New York market opens.
By trading with popular currency pairs during times when trading volume is likely to be higher, you will be able to aim for price movements efficiently in a short time.
No matter how long you wait during the time when there is no price movement, no trading opportunity will come.
Occasionally, trading opportunities may come, but if you depend on something that you do not know whether or not it will come, it is still more efficient to trade during the time when there are many opportunities.
Characteristic and Trend of each currency
Conclusion
It is better to know the volume than not to know it, but unfortunately, it is no exaggeration to say that there is no way to know the volume accurately and in real-time in Forex.
It is possible to know the partial volume, but it will not be accurate either.
Of course, the market may move according to the data and you may make a profit, but sometimes it isn’t the case.
After all, the volume information is about that level.
This information is useful to the last, but cannot be a decisive hit.
If you blindly follow the volume and assume that you can win if you follow this method, you are more likely to lose.
So keep it as a reference only, and trade carefully so that you only trade when you can definitely win.
