Everybody knows that 95% (maybe 99% or more? who knows for sure?) of all traders in forex are loosing their money. So the most obvious way to earn is to trade against the people that are loosing, to trade against the 95% crowd. The idea is so simple, but to make it alive we should know how they trade. To be more exact we need to see their positions and orders in the market.
And there is such a tool! OANDA is a popular, old and trusted corporation. And it is among leading companies in forex industry by trading volume and the number of traders. They provide FxLabs service that allows to analyze additional data related to the market. The most interesting tools for analysis that are present are OANDA positions ratio and orderbook.
Position ratios can be found here: https://www.oanda.com/forex-trading/analysis/open-position-ratios
The picture shows the ratio of long vs. short positions for major currency pairs held by OANDA's clients. The left percentage shows long positions, the right percentage shows short positions.
The ratio is sampled every 20 minutes for 16 instruments: AUDJPY, AUDUSD, EURAUD, EURCHF, EURGBP, EURJPY, EURUSD, GBPCHF, GBPJPY, GBPUSD, NZDUSD, USDCAD, USDCHF, USDJPY, XAUUSD, XAGUSD.
Similar information is provided by myfxbook. It can be found here : http://www.myfxbook.com/en/community/outlook
They analyze all accounts that are real and verified (as they write). So there are a lot of supported instruments and the data is refreshed every minute. As myfxbook is the most popular monitoring service for forex and metatrader, we can assume that the numbers are somewhere not very far from reality.
Using this ratio we can try to build a simple system. We can buy when there are less than for example 30% of buyers in the market and sell when there are more than 70% of them. Even this very simple strategy can work! But not for all instruments. It can work for USD* and *USD pairs, because main trading volumes are there and it probably won't work for cross pairs because of low trading volume comparing to *USD pairs.
Also it probably won't work for metals pairs (XAUUSD and XAGUSD) because metals are good instruments for investment, so there will be more buyers than sellers almost all the time. But for metals we can improve the strategy and trade when the ratio changes fast.
Position ratio is a good instrument. But OANDA orderbook seems to be much better.
It can be found here: https://www.oanda.com/forex-trading/analysis/forex-order-book
The histogram can show the snapshot or clients' orders or positions.
When orders are shown, the histogram represents the distribution of all orders opened by OANDA's clients (limit and stop orders, stop losses and take profits) by price. So it can be used to find significant price levels and valuable order clusters that can lead to certain price behavior. For example, using this histogram you can see the places where stop hunters will be active.
There are few forex brokers that provide useful market depth information. Using this tool we have information that is very deep and contains the distributions not only for limit orders, but also for stop orders. I think, there is an advantage here.
And even bigger advantage is that you can use the information from these OANDA's tools right in your MT4 terminal.
Here is the video containing a quick overview of available functionality:
I hope you will like these instruments and they will help you to earn more money. Good luck!
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