Price Formation — Stocks & Futures Exchanges vs Forex

Why Price Formation Matters

Before looking at any chart, it helps to ask: where does this price come from? Is it a trade that actually executed, or just a quote from a liquidity provider?

The answer determines whether your tools are reading real executed volume or an approximation, and how trustworthy wicks, highs/lows, and volume clusters really are.

At a Glance

• Stocks & Futures: centralized exchange, last traded price, real volume.
• Forex (Spot FX): decentralized OTC, bid/ask quotes, tick volume.
• Order-Flow Tools: more precise on exchanges; approximate on spot FX.

Exchange-Traded Markets (Stocks & Futures)

Stocks and futures trade on regulated exchanges (NYSE, CME, ICE…). All participants send orders into the same central order book, where a matching engine pairs buyers and sellers.

Every execution generates an official record:

• Last Traded Price (LTP)
• Trade size (real volume)
• Bid & Ask depth at each level

As a result, there is a single, authoritative price and a single, authoritative volume for each symbol on that exchange.

Price Formation: Last Trade Drives the Chart

On exchange-traded instruments, the chart updates whenever a trade executes. If the last trade happens at 4215.50, the bar’s price changes to 4215.50—it does not move just because someone updated a quote.

That means:

• Every tick on the chart is backed by a real transaction.
• Highs, lows, and wicks reflect actual trade activity.
• Volume is the true traded quantity (shares or contracts).

Real Volume Availability

Because all trades in a symbol go through a single exchange, the reported volume is:

• Accurate – every trade is counted.
• Complete – nothing from that exchange is missing.
• Time-stamped and aligned to each bar.

Tools like Footprints, Delta, and Volume-by-Price / Volume Profiles all rely on this real volume to show where participation concentrated and which side was aggressive.

This is also what Timeless Charts exploits when you apply Footprints and Volume Profiles on futures or stocks: you’re reading a clean stream of executed orders rather than just quotes.

Forex Market (Spot FX)

Spot Forex is not traded on a single exchange. It is a decentralized OTC market where banks, ECNs, brokers, and other participants quote prices to each other.

Each liquidity provider has its own order book and its own best bid/ask. Your retail broker aggregates quotes from one or more sources and builds the price feed you see.

No Single “Official” Last Traded Price

Because there is no central matching engine, there is no universally agreed last traded price for EURUSD, GBPJPY, etc. Instead, your platform displays the broker’s bid (and often the ask as an overlay).

Consequences:

• Price can move on your chart even if no trade happened at your broker.
• Highs/lows may differ between brokers.
• Spreads and micro-structure are provider-dependent.

Bid-Based Price, Not Trade-Based

Most FX charts are built from the bid price (some use the mid-price). The bar updates whenever quotes change, regardless of whether anything actually trades there.

In other words, the chart shows where the market could trade, not where it did trade.

No Real Volume, Only Tick Volume

Without a central exchange, brokers cannot see the global traded volume. Instead, platforms usually show tick volume:

• Each “tick” = one price update.
• Bars with more updates show higher tick volume.
• This correlates with activity but is not actual traded size.

FX futures (e.g., 6E, 6J) do have real volume, but they represent the futures contract, not the entire global spot market.

Last Traded Price vs Bid-Driven Price

On exchange-traded instruments, a new print on the chart always corresponds to a trade that executed. On Forex, many price changes are just quote updates without any real transaction behind them.

For order-flow and volume-based analysis, this distinction is crucial.

Exchange Charts

• Each tick = executed trade.
• Candles & wicks = real auction extremes.
• Footprints, Delta, and Volume Profiles are built on true volume.

Forex Charts

• Each tick = quote change (not necessarily a trade).
• Highs/lows can be slightly different across brokers.
• Order-flow tools are approximate or rely on futures proxies.

Practical Takeaways

If You Trade Exchanges (Stocks & Futures)

• Trust that each print reflects a real trade.
• Use Footprints, Delta, and Volume Profiles to locate absorption, initiative flow, and high-volume nodes.
• Combine with timeless bars to compress noise and highlight real moves.

If You Trade Forex

• Remember your chart is quote-driven, not trade-driven.
• Treat tick volume as an activity proxy, not a precise volume measure.
• For detailed order-flow, consider FX futures as a proxy (e.g., 6E for EURUSD).
• Use structure-first tools (Renko, Range, Line Break, Kagi) to reduce noise from quote flicker.

Timeless Charts for MT5 lets you apply the same structural logic across both futures and FX, but the underlying data quality still depends on whether the instrument is exchange-traded or OTC.