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The last time I presented this idea, many pages ago on this thread, my idea received a lukewarm reception to say the least. Before you all go jump down my throat, PLEASE do yourselves a favor and watch the up/down volume for a week or so and see what you think.
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Hi Tasuki, Friendly debate rather than throat jumping from here!
If I understand correctly what you are looking at is volume @ bid and volume @ ask. Red prints vs green prints from the tape. I looked at this extensively a while back along with market delta and footprint charts. I have just started experimenting with a constant range chart 1 tick wide with a volume @bid/ask histogram to see 'walls' build at different levels. Trevor published some of my observations on the old markedelta website so maybe it had some value. Probably still buried in the blog area.
Heres the thing, while delta & volume@bid/ask are useful tools I think there are lots of mis-apprehensions about them. (volume on upticks vs downticks gives very similar results to volume@bid/ask too).
Let me just throw out some ideas.
1) In futures markets for every print on the tape there is a buyer and a seller. This can be buying/selling to open/close so there are 4 types of participant. I am not aware of how you can differentiate between people opening or closing until we get real time open interest, that would be something! We need to remember at all times there is always a buyer and seller. Always.
2) Traders that hit the bid or the ask can be considered 'aggressive' buyers or sellers, those wiling to pay at market if you like. Stops will show up as aggressive as they convert to market orders. What these indicators measure is aggressive (at market) buyers and sellers.
3) One of the core premises of
VSA is that the smart money/ (for smart read big) sells into rising markets and buy falling markets. This is the only way they can shift the size they need too. Hence weakness showing up on up bars and strength on down bars.
I think 1) 2) & 3) are probably 'facts' now a bit of conjecture. If we accept 3 then the smart money has the luxury of selling on the ask in an up move. To stop a move they aren't going to hit the bid again they are going to just keep refreshing the ask until more aggressive sellers show up. This dosen't jive well with the whole market delta volume@ask thing. Well not in the way its often presented i.e red 'selling' green 'buying'. In fact the only time this holds true is when the market is trending in a nice controlled fashion. The Smart money does not often need to buy/sell aggressively except perhaps to kic start a move.
Now I'm not saying these tools aren't useful but you have to be careful how you interpret the info. The problem they present for me is that it tends to draw me into the micro fluctuations and I tend to get 'wiggled out' by them. Thats not a problem with the tools but personal discipline!
Cheers.