Volume profile from tick volume: usable or not?

[Shadow Trader]

Volume profile shows how much volume traded at each price level over a period. In spot forex, true volume isn't centrally recorded, so charts use tick volume instead: the number of quote changes at each price.

The question is whether that proxy carries useful information. Studies on the relationship between tick volume and actual traded volume find a decent correlation on short intervals. Spots with many ticks tend to be spots with a lot of activity.

Limits are important. Tick counts depend on the broker's feed, so profiles built on different feeds will differ. Quote changes aren't trades, and some ticks reflect liquidity provider repricing, not real orders.

Usefulness depends on purpose. For finding rough areas where price lingered, tick volume profiles work well enough. For precise claims about where large orders sit, they don't.

The best check is comparing the profile from a broker feed against the one from CME currency futures for the same period, and seeing how closely the high-volume nodes match.

To run the comparison, export one-minute tick volume from the broker and one-minute volume from the futures contract for several weeks. Build a profile for each, using the same bin size, then overlay them. If the top three nodes match within a couple of pips most days, the broker's tick volume is a reasonable proxy. If they don't, the profile is a feature of the feed, not the market.

How closely do the tick-volume nodes match futures volume nodes, and are they used for levels?