Volume

[firewalker]

Note: Those who are interested in the subject of volume will also be interesed in Wyckoff's Volume Studies.

Not sure where to post this exactly, but as it's volume related the Wyckoff Forums is a good place to do that... although perhaps a new thread no volume should be initiated? Anyway, moderators are free to move this post if they feel it's more approriate elsewhere.

Found this interesting article refering to the "crap volume" that has been mentioned several times in 'Riding the Wyckoff wave' thread.

"Typical daily volume at the New York Stock Exchange has fallen to between 1.1 billion and 1.2 billion shares a day from around 1.5 billion shares in mid-March.

Marc Pado, a Cantor Fitzgerald U.S. market strategist, said the past two months' levels are typical of summer holidays starting "pretty much after the kids get out of school." [-> ehm, right ]

"On Nasdaq, volume has slumped in the last two months to around 800 million shares a day, after running close to an average last year of 1.4 billion shares.
Trading in previous years has not dropped off until after Memorial Day, the unofficial kickoff of the U.S. summer holiday season.

This year, NYSE volume has held below its 200-day moving average of about 1.53 billion shares since April 2, the longest such below-par streak in at least 13 years. At the Nasdaq, prime exchange volume has been below its moving average since March 24, the longest such streak in 16 months.

Full article here: http://www.guardian.co.uk/business/feedarticle/7531703

[DbPhoenix]

Originally Posted by firewalker Not sure where to post this exactly, but as it's volume related the Wyckoff Forums is a good place to do that... although perhaps a new thread no volume should be initiated? Anyway, moderators are free to move this post if they feel it's more approriate elsewhere.

That's us. And it doesn't seem inappropriate. But what point are you making? Are you asking about the relationship between volume and trend?

[firewalker]

Originally Posted by DbPhoenix That's us. And it doesn't seem inappropriate. But what point are you making? Are you asking about the relationship between volume and trend?

I'm not trying to make a point or anything. I'm sure we've all observed the volume as such... I just found the article interesting because it gives more perspective to the volume, once you compare with history.

I might as well throw a question in the air then... how does one know the volume signals a lack of participation from the buyers or signals a situation where price rises because most of the supply has been removed?

Another Q: The person from the article mentioned "summer volume"... how do we interpret volume from different time periods? Most of us will be wary of lunch time because the lack of any decent volume may be nothing more than an illustration that the big boys are having their break... But what about the impact of seasons and what about comparing volume from year to year? Volume now is on a whole different scale than, say, 20 or 50 years ago...

[DbPhoenix]

Volume is largely irrelevant unless one is at a point where it becomes relevant, i.e., an important test of some sort. What is more important is the movement of price. Price can move dramatically either up or down on very little volume at all, so avoiding a trade just because volume is "low" is unjustified.

Note that it's important to place this within the context of what's being traded. If one is "trading" a largecap fund favorite over the longer term, the volume differences may be so minute as to be almost undetectable. And yet the stock moves. At a snail's pace, maybe, but it moves. But an intraday trade of something illiquid will provide a different picture. Then there are futures. And forex. And ETFs.

Much is written about volume that is misleading. This arises out of seeing volume as an indicator, which in turn is the result of plotting it as a bar. But volume simply tracks trader behavior (which is why I'm more interested in the volume of advancers v the volume of decliners in the indices rather than "volume" in them as a whole). Focusing on that will help the trader put it in its place.

[Tannism]

Originally Posted by DbPhoenix But volume simply tracks trader behavior (which is why I'm more interested in the volume of advancers v the volume of decliners in the indices rather than "volume" in them as a whole). Focusing on that will help the trader put it in its place.

I am rereading and rereading Neil. He encourages translating trading volume into $$ as insightful. While this is not natural for me, it may be like learning blending candlesticks, with enough practice, the eye automatically blends. I have been asking myself, why go through the effort of learning how?

Understanding his concept may relate to 'behavior' ...when traders are actually putting the money into or the taking money out of the trade.

[DbPhoenix]

Originally Posted by Tannism I am rereading and rereading Neil. He encourages translating trading volume into $$ as insightful. While this is not natural for me, it may be like learning blending candlesticks, with enough practice, the eye automatically blends. I have been asking myself, why go through the effort of learning how? Understanding his concept may relate to 'behavior' ...when traders are actually putting the money into or the taking money out of the trade.

Viewing volume this way ought to help the trader to avoid looking at it as an indicator. And I suppose that one could argue that this is what Market Profile does, or my boxes: relating volume to price in a way other than "bars".

[gassah]

http://tradingsuccess.com/blog/es-05-23-2008-374.html

Barros making swing volume comparisons within trends.

[gassah]

I've tried to simply Ray's chart by staying within the defined 5d swings.

[firewalker]

Originally Posted by DbPhoenix Volume is largely irrelevant unless one is at a point where it becomes relevant, i.e., an important test of some sort. What is more important is the movement of price. Price can move dramatically either up or down on very little volume at all, so avoiding a trade just because volume is "low" is unjustified.

I wasn't implying you should avoid the trade, but it's worth the observation imo.

Originally Posted by DbPhoenix Much is written about volume that is misleading. This arises out of seeing volume as an indicator, which in turn is the result of plotting it as a bar. But volume simply tracks trader behavior (which is why I'm more interested in the volume of advancers v the volume of decliners in the indices rather than "volume" in them as a whole). Focusing on that will help the trader put it in its place.

I'm not saying single bars are important, but in a 'healthy' uptrend wouldn't one want to see volume decreasing on the pauses or moves against the trend and picking up again along the trend? Or have you changed your view on this and do you no longer consider it of any importance?

[DbPhoenix]

Originally Posted by firewalker I'm not saying single bars are important, but in a 'healthy' uptrend wouldn't one want to see volume decreasing on the pauses or moves against the trend and picking up again along the trend?

Yes, but that doesn't have anything to do bars. One sees this motion even better by plotting volume as a line.