Open and Free Discussion on Volume

[BlowFish]

For any interested in 'volume' its probably worth taking a look at Studies in Tape Reading by Rollo Tape (a pen name of Wycoff) or Tape reading and market Tactics by Neil. These cover 'volume sequences' but in language that most any market practitioner will understand.

[nkhoi]

it's readable and only 10 bucks at amazon

[Dinerotrader]

If we could just get more traders in an educational forum like this to post a real time trade with strategy and comments the educational value to all those reading would increase 10 fold. Thalestrader, I applaud you for taking the time to truly demonstrate your method bar by bar without the enormous problems that hindsight analysis provides to all trade analysis. Blowfish, thanks for the suggested reading.

Cheers.

[rcossey73]

Originally Posted by johnjohn1hew This is me trying to get this thread back on track for the volume curious. In short, if prices are rising there is more demand than supply. If price are falling there is more supply than demand. The buyers have to search higher for sellers (D>S) and the sellers have to search lower for buyers (S>D). One will need an understanding of market structure in-order to fully grasp this theory. I learned it by studying the DOM ladder.

Thanks, I agree with this statement. However this seems to indicate I don't need to look at volume at all. I can determine this by watching price.

[thalestrader]

Originally Posted by johnjohn1hew Something i felt like contributing to the thread. I guess this is what someone would call price-discovery. Traders are always searching for trades. If they cannot find these, then price moves (representing this search). When they have found trades, then price will move sideways until traders once again have to search for trades. Example: when price is rising the majority of the sellers are finding prices too cheap and are withholding their selling orders until they find prices to be high enough. Since price is rising, the buyers are obviously agreeing with the sellers that price is too cheap. When price arrives at a suitable level to the sellers, they will start to sell and whatever buyers are left will buy. This will most likely lead to a congestion (representing an area at which a lot of traders are willing to trade with each other), from which price will leave once traders no longer agree on value. The trend is a result of a disagreement and the congestion is the result of agreement.

First of all, johnjohn, let me say that if anything that follows strikes you as offensive or combative or in any manner an attack on you or your post, please know that such is not my intention. I do appreciate your posts, including the one quoted here.

Let us assume that your description of the phenomona is accurate. This still begs the question as to how does one convert this information into action, i.e. how does one use it to place trades?

George Lane, who did know a thing or two about auction markets, argued that price rises due to the the activity of "inspired buyers," i.e. short sellers covering, and not because of a search for value by buyers and sellers agreeing that current price is too low.

In my opinion, the concept, "value," is itself devoid of value to the speculator; and volume, as an indicator of future price movement on any time frame shorter than one composed of daily data, has so little value as to warrant the speculator's dilligent inattention.

Only one person has articulated a trading strategy in this thread that actually uses volume information to support trading decisions: Blowfish and his use of volume on 15 second charts looking for potential reversals to scalp. And, if I am not mistaken, price, specifically price action around support and resistance actually trigger and guide Blowfish's trades.

If volume leads price, always, as has been asserted here, then someone should be able and willing to demonstrate how volume caused them to buy or sell, price be damned. Thus far, no one has even come close.



Respectfully,

Thales

[ehorn]

Originally Posted by Spydertrader Volume leads Price. Always. - Spydertrader

Might make a catchy title for a new thread...

[johnjohn1hew]

George Lane, who did know a thing or two about auction markets, argued that price rises due to the the activity of "inspired buyers," i.e. short sellers covering, and not because of a search for value by buyers and sellers agreeing that current price is too low.

A trader is not a dedicated bear or bull. A trader is a person who goes with his/her opinion of the movements of price (+volume). If the traders who believe price to be unacceptable overcome the traders who believe price to be acceptable, price would not stay in a range, price would vacate this range and start trending. In a range, traders find the top to be expensive and they express this belief by selling; and at the bottom they believe these prices to be cheap, so they express their belief by buying. They believe the top to be expensive because of a lack of buyers, or because of previous levels, or because of whatever. They believe the bottom to be cheap because of a lack of sellers, or because of previous levels, or because of whatever. They are selling at the top because they find price to be acceptable and they are buying at the bottom because they find price to be acceptable. If this continually happens, then a range of acceptable prices is the result. When the levels inside the range are no longer acceptable, price may move in the direction in which acceptable prices reside. By saying that "price may move in the direction in which acceptable prices reside" i mean that in order for prices to move, a force has to be driving them. If traders are unwilling to exert a force, then price will not move. On the way to the top, buying is taking place because of short-covering and/or because of new longs. The short-covering traders have found price to be unacceptable, so they take their profits. The new longs have found prices to be acceptable so they establish their long positions. Eventually both types of buying will cease. The short-covering will cease when their are no more traders their/willing to cover. The long buying will cease when prices are at a level that is unacceptable. When the long traders decide to sell, it will be at a level of unacceptable prices, as they no longer want to hold their positions. At this level, new shorts will also enter as they find price to be at an acceptable level. This action will take price down to a level of unacceptable/acceptable prices.

In my opinion, the concept, "value," is itself devoid of value to the speculator; and volume, as an indicator of future price movement on any time frame shorter than one composed of daily data, has so little value as to warrant the speculator's diligent inattention.

Value is an occurrence of an acceptable/unacceptable range in price. The buyers, at the bottom, believe price to be more inclined to go up and the sellers, at the top, believe price more inclined to go down. This type of analysis is not a methodology built on top of what occurs in the markets, it is what occurs in the markets. Value is just what happens as a result of traders trading.

If volume leads price, always, as has been asserted here, then someone should be able and willing to demonstrate how volume caused them to buy or sell, price be damned. Thus far, no one has even come close.

I stated that i do not believe this idea to be accurate. Here was my post on the subject.

Originally Posted by johnjohn1hew What volume is, is not up to an individual's discretion. Volume is the quantity of contracts (or other vehicles) traded. PERIOD. Volume and price are instantly plotted at the same time as volume can not be plotted without a result in price and price can not be plotted without an appearance in volume. Traders make volume and volume is plotted at the same time price is created. Price is the price at which traders have traded. Price does not lead volume and volume does not lead price. Ideas of movements (which are opinions of the future direction of price) lead volume and price (i.e. traders' actions lead price, which are represented on the chart as volume and price). So one could say volume and price leads volume and price. When Wyckoff (or whoever stated it first) said that volume is the effort and price is the result, he was not pulling this out of his ass, he was stating the obvious. If you submit a market order to buy one contract you are adding 1 unit of volume to the volume bar and one point in price to the chart AT THE EXACT SAME TIME. Wyckoff, Livermore and the other price action (+volume) gurus realized the obvious and traded accordingly.

Also, i focus on the relationship between volume and price. I can make no deductions based on volume alone. Deductions can be made on price alone, but i choose to use both, as i believe volume to enable me to more accurately guess the reasons why price is moving the way it is.

[johnjohn1hew]

Originally Posted by ehorn Might make a catchy title for a new thread...

I see volume and i see price. Both of these elements are plotted at the same time. People base their actions on the movements of price (+volume). Price and volume lead price and volume. This is what makes sense. This is not some random theory based on nothing, this is what happens. If you watch a real-time, 1 volume bar chart you will see that for every one unit of volume a price is plotted.

[thalestrader]

Originally Posted by ehorn Might make a catchy title for a new thread...

So the idea is that if you folks say it enough times the masses will start to believe it?

Looking at Thursday's price action with volume data one could more easily conclude that volume follows price. For example, when price finally broke below the line in which it traded for most of the day, volume increased. Volume was timid and indecisive until price signaled its direction out of the line.

After all, are we to believe that bulk of the volume trade during the 15:25 EDT bar (based on Ninjatrader's time stamp) occurred prior to the price break, and price dropped in response to that increase in volume? Or did price break, and volume swelled as price continued to move down from the now broken support?

In the end, the real question is how do you trade it? See my charts attached here: If I were not already in a short position, I would have traded that break with a sell stop at 896 and a stop loss at 899.25. I would have had a profit target somewhere just above 891.25 support. Anyone, including my nine year old daughter, can look at the chart, read my explanation as to how I would have traded that break, and duplicate it in the future. This is emphatically not the case with the contributions made by you and your friends to this thread.

I've attached my charts - one with volume one without. If one looks at the volume bars, it seems to me that volume follows price, and not the other way around. Volume, in addition to simple number of contracts, represents the level of activity by people. The history of the world shows that people are many followers and few leaders. People are always looking for someone or something to follow.

As I said before, anyone can put "I sold here" and "I covered here" on a dead chart 72 hours after the closing bell and look, or I should say, try to look like a genius.

This is not to say that there cannot be usefulness in such annotations on a dead chart, so long as explanations are clear, and all relevant and necessary information is provided.

However, yet again, here is another proponent of a view, to wit, the view that "volume leads price, always," who claims to have made a wonderfully profitable trade, selling at almost the HOD and covering at the LOD, but without any explanation of 1) why he entered, 2) at what price he entered, 3) was entry a market, limit, or stop order and why?

I do believe that it is possible to sell the HOD and buy the LOD occasionally. But to make such claims and not detail how the feat was accomplished has a bad odor to it. Many folks on July 2 no doubt sold market on open, and their doing so had nothing whatsoever to do with any thing other than that price itself was pointing to lower prices. But that is not given as the reason in your post or that of your friends. I am not even doubting you and your friends made the trade. But no one here could look at what you did and duplicate the trade in the future on the basis upon which you claim to have made it, because there has been no basis given.

I really do not believe I am being unreasonable. If you folks are for real, then why not share the minimum required for intelligent and respectful human communication?

I participate here at TL because it has always seemed, for the most part, like a forum of seriously interested folks, with very little of the guru speak and fraud that one sees over at other forums, most notoriously notable, ET. I have apparently stirred the nest and we have attracted the the attention of the minions of a few gurus who have a near cult-like following (see how many who have rushed to defend the manifesto are new to TL, and who have a mere handful or even fewer posts here). In the interest of preserving the character of TL, and hoping that this contagion maybe contained, rather than spread throughout the forum, I will no longer participate in this thread.

And I reiterate: People are always looking for someone or something to follow.

Best Wishes,

Thales

[thalestrader]

Originally Posted by johnjohn1hew A trader is not a dedicated bear or bull. A trader is a person who goes with his/her opinion of the movements of price (+volume). If the traders who believe price to be unacceptable overcome the traders who believe price to be acceptable ...

Though I am no longer going to particpate in the discussion on this thread, I feel that I owe you an explanation of my prior port to which you have repsonded.

I was only trying to make a point about the usefulness or lack of usefulness to trading of various abstract concepts. I appreciate your comments, and in the end your account may very well be correct.

But to me, such accounts are far too academic and abstract and removed from the reality of trading to have any practical application.


Respectfully,

Thales