Open and Free Discussion on Volume

[DbPhoenix 42]

I agree that volume can provide useful information at times.

 

I am primarily interested here in the assertion that volume is primary to and somehow trumps price.

 

I've said in other threads in other forums over the years that unless the participants in a discussion agree on the meanings of terms, most recently, "fractal", the discussion may generate lots of heat but little to no light.

 

Clearly there is no general agreement here on what is meant by "volume". That's why some of the statements seem so, shall we say, untenable. I've seen threads like this go on for literally hundreds of posts without anyone ever agreeing on just what it is they are talking about.

 

Given the collective intelligence and experience of those who are involved, it seems like such a waste.

[ZOSO 10]

Without the knowledge of whether volume represents opening or closing trades, it's usefulness for me is negligible.

 

Spydertrader, I think, was the head minion and proponent of a certain trading philosophy ascribed to a Mr. Jack Hershey. These ideas was analyzed and debated ad nauseum at ET on a multitude of threads.

 

Note to the moderators: the last thing you want is this site to turn into a bully pulpit for the theories of Mr. Hershey as personified by Spydertrader in the Iterative Refinement journal on ET.

 

Note to Spydertrader: Please take no offense.

[HAL9000 10]

Just a thought,

 

what variables are there to play with:

 

price,

 

volume (and maybe the number of trades, which might depend on volume, i.e. not a free variable),

 

time.

 

Now we can play with these variables.

 

 

We can just use different kind of charts.

 

---

 

Now my view:

 

Is it important, whether I get stopped out on low or high volume?

 

I think not, the stop depends on price,

but it is interesting to see, on what volume the price moves happen.

 

High volume up, low volume down, etc. until it stalls.

 

Well, do you have to watch volume, maybe, but s/r lines and trendlines

seem to be more important to me. And these lines are based mainly on price

(at least, if you look at a price chart).

 

Now this thread is about volume, but what is about time?

I ask this, because I used tick charts for quite while, now I am looking at range bars, and the market seems to follow its rules 24 h a day,

on low/high volume, on low/high trade numbers, in slow motion and on fast track.

 

I just discovered it for me now,

I thought the old traders used P&F charts,

now I ask myself if range bars are a new form of them?

 

Anyway, I don't have to switch from a 500 tick chart to a 50 tick at night anymore, and trendlines are as clean, as they can be in my view.

 

Sorry, that I went off topic, but if my impression is right, doesn't

this imply, that volume can just give you additional hints, while price rules?

 

Yes, if you play with 1000 ES lots its different compared to play with 1,

but just playing with one would be an advantage then, because you can do it 24 h a day.

 

Just thoughts.

Edited June 23, 2009 by HAL9000

[atto 20]

Regardless of Spyder's (and Hershey's) reputation elsewhere, founded or not, he has been rather amicable and salutary here at TL, which is probably due to the lack of trolling and hostility. As long as that continues, if people find value in his contributions, good for them. If not, they can move on peacefully.

[Spydertrader 10]

Note to Spydertrader: Please take no offense.

 

People remain free to read my posts or not, find value in my words or not, learn something, or not. I subscribe to no religion, philosophy or school of thought when it comes to trading. I simply trade using the principles of the Price Volume Relationship, and I have done so full time, as my only source of income, for the last five years.

 

In other words, being called a name by an annonymous username on an Internet Web Site doesn't come close to offending me.

 

Besides, this thread isn't about me, what methods I trade, or what I did on ET. It's about Volume. I'm sure the OP would want it to stay on topic, so why don't we all try to have some respect for the OP and stay focused.

 

- Spydertrader

[HAL9000 10]

Open and Free Discussion on Volume

 

This should say it all.

[BlowFish 10]

AS this is open discussion I'll post these here The high of the day (so far) on the DAX followed by a low (not the low) some hours later. No fancy volume based indicators just a 15second chart with a volume histogram. In isolation dosen't mean much but there are some plain (to me) clues here.

[rcossey73 10]

AS this is open discussion I'll post these here The high of the day (so far) on the DAX followed by a low (not the low) some hours later. No fancy volume based indicators just a 15second chart with a volume histogram. In isolation dosen't mean much but there are some plain (to me) clues here.

 

I have often wondered if I should start taking volume into account with my setups.

 

It is interesting that when I look at your charts I see the exact same thing when I cover up the volume or look at them with the volume. Not sure I could find a way to trade those charts any different taking the volume into account.

 

I see the following...

 

Price goes up on low volume

Price goes down on low volume

Price goes up on high volume

Price goes down on high volume

There are big price ranges on low volume

There are small price ranges on low volume

There are big price ranges on high volume

There are small price ranges on high volume

... Am I missing something?

[Tams 20]

I have often wondered if I should start taking volume into account with my setups.

 

It is interesting that when I look at your charts I see the exact same thing when I cover up the volume or look at them with the volume. Not sure I could find a way to trade those charts any different taking the volume into account.

 

I see the following...

 

Price goes up on low volume

Price goes down on low volume

Price goes up on high volume

Price goes down on high volume

There are big price ranges on low volume

There are small price ranges on low volume

There are big price ranges on high volume

There are small price ranges on high volume

... Am I missing something?

 

 

 

What are the context of those observations?

[BlowFish 10]

I have often wondered if I should start taking volume into account with my setups.

 

It is interesting that when I look at your charts I see the exact same thing when I cover up the volume or look at them with the volume. Not sure I could find a way to trade those charts any different taking the volume into account.

 

I see the following...

 

Price goes up on low volume

Price goes down on low volume

Price goes up on high volume

Price goes down on high volume

There are big price ranges on low volume

There are small price ranges on low volume

There are big price ranges on high volume

There are small price ranges on high volume

... Am I missing something?

 

Just look at the volume peaks. "Peaks" are kind of a relative term but look what happens when there is a spike that is about 4 or 5 times the norm. If you simply faded any 15second bar with 400+ volume I am pretty sure you would make decent money. If you only look at this sort of thing where you might anticipate major S/R even better.

[euclid 10]

"Height of Volume Bars" represents only one possible relationship shown on the chart with Respect to the Volume Bars. By first understanding the fractal nature of the market, and then, applying that understanding onto one's chart, the trader can readily see the same sequences repeat - over and over again.

 

- Spydertrader

 

Eh? The height of the volumes bars is the volume it is all the information the volume bar gives.

 

I understand that you are trying to show fractal waveforms in the volume data. I'm not convinced you can extract four separate waves from that small amount of data. You seem to be using price as the primary cue as to where the volume waves are. I don't see how you claim volume leads price from this.

 

Sorry, I'm not convinced about these sequences either. Never mind, whatever works for you.

[davem1979 11]

I have been studying volume as an indicator of price movement and although I am not trading live, I see many potential patterns of price and volume and market delta possible to create trading setups. These are my observations...

 

1. High Volume climaxes at support or resistance many times can create price rejection, shown through hammers, or inverted hammers, or narrow range bars. This can be an indication of possibly more strength or weakness coming into the market.

 

2. When price returns to a previous High Volume area at a prior High or Low, and there is low volume, maybe the delta is becoming less positive, fading these extremes based on the volume/delta information seems like one is using a more complete understanding of the market to make those kinds of trades.

 

3. When a market makes a new low and the next few bars close above that low, many times you see a candle with low or high volume test the lows again and close near its' highs. A high volume test and a positive delta volume could be used to confirm a further up move. A low volume test could also mean that sellers are not hitting bids, but this is also at times an indication to traders that if lows are tested and nobody is hitting the bid, then buyers don't have to worry so much about pushing through a heavy supply essentially making it easier for them to take prices higher.

 

4. Delta Divergence (which is outlined on Market Delta website) = Higher Highs or Lower Lows made on a delta which is less than the previous bars. For instance, let's say that price reaches a prior resistance level, and the delta is becoming less and less positive, and turning negative at resistance, meaning more and more people are selling, and less buyers are aggressively lifting the offer, this could be an indication that the market is not interesting in trading above resistance and that the market will return lower.

 

5. Looking at trading ranges---pretend we're in an uptrend, and the ES dropped in the morning, from 912 to 900 and a now it's a few hours later and there's a 4 point range developing between 904 and 908. Why not look at volume as it is traded near 904 vs. 908, and if we see more volume and positive delta around 904's vs. 908's and that at the 908's the delta is not strongly negative, we could form an opinion that the buyers are supporting the market, but aren't yet ready to take price higher, and buyers can either hold on to longs, or try to enter on a failed selling test of the 904's....

 

6. if you just look at a volume at price chart, without looking at the volume of each bar, you can get good ideas of where the market is finding value, and where trades make sense to be entered---

--------

On another note, for those who enjoy learning about volume and market internals, and market psychology, a trader and psychologist named Brett Steenbarger has a blog here TraderFeed

 

And correct me if I am wrong, but he uses volume, volume at price, VWAP, as well as the market internals such as NYSE TICK, to form not only an opinion of what the market is attempting to do, but to create his trade setups.

------------

 

To me, undertanding volume and how price is being affected by it seems like one of the best tools for gaining an edge and understanding why the market is doing what it's doing.

 

Best,

David

[jajuanm2 10]

VSA works! However, if someone has a hammer in their toolbox it does not mean they understand how to use it to build a house. The person probably can drive a couple of nails and yet not understand how to build a house. It takes a little time to learn how to use volume , but once you get the art down you will be on your way to something special. I use to be afraid that too many people would find out how to use it and that it would stop working for me. In summer months, setting minimum volume levels for different time frames helps to keep you on the side lines until it's time attack. Also you still have to know where the S&R levels are . A lot of times volume is just pushing to a level where the big orders are located. In short, you have to understand market structure and S&R levels to use volume properly. You also can't try to make using volume a mechanical process. There is judgment involved because you have to put things into the context of the market structure. You also have to monitor multiple time frames to understand the structure. Once you do that, just stay out of chat rooms and just let the tape tell you what to do.

[Spydertrader 10]

Eh? The height of the volumes bars is the volume it is all the information the volume bar gives.

 

Much more information exists in a Chart Volume Pane than simply the 'height' of a specific Volume Bar. The slope of the changes in Volume changes over time. The Peaks and Troughs of Volume change over time. These represent just two examples of items which exist within the Volume Pane. Other information (such as the sequences mentioned previously) exist there as well.

 

I simply suggest some might find value in making an attempt to look at Volume from a different point of view.

 

I understand that you are trying to show fractal waveforms in the volume data. I'm not convinced you can extract four separate waves from that small amount of data. You seem to be using price as the primary cue as to where the volume waves are. I don't see how you claim volume leads price from this.

 

Volume leads Price because unless and until the sequences of Volume complete, the trend cannot change. The largest (slowest) fractal cannot complete its sequences unless and until the smallest (fastest) fractals complete their sequences. Volume provides the signal indicating when each fractal completes, and as such, provides the signal required to see when one trend has ended and another trend has started.

 

Sorry, I'm not convinced about these sequences either. Never mind, whatever works for you.

 

DB brings up a valid point about vocabulary and common definitions. When I use the term 'fractal' I do not refer to 'time frame' (e.g. 5 min, 30 min, daily, etc.). Instead, I use the following definition:

 

(n) fractal (mathematics) a geometric pattern that is repeated at every scale

 

When I refer to Volume, I mean any information gleaned from a Chart Volume Pane as it pertains to the various Volume bars and not exclusively the absolute Values of each bar.

 

Good trading to you all.

 

- Spydertrader

[thalestrader 14]

Volume leads Price because unless and until the sequences of Volume complete, the trend cannot change. The largest (slowest) fractal cannot complete its sequences unless and until the smallest (fastest) fractals complete their sequences. Volume provides the signal indicating when each fractal completes, and as such, provides the signal required to see when one trend has ended and another trend has started.

 

 

 

DB brings up a valid point about vocabulary and common definitions. When I use the term 'fractal' I do not refer to 'time frame' (e.g. 5 min, 30 min, daily, etc.). Instead, I use the following definition:

 

(n) fractal (mathematics) a geometric pattern that is repeated at every scale

 

When I refer to Volume, I mean any information gleaned from a Chart Volume Pane as it pertains to the various Volume bars and not exclusively the absolute Values of each bar.

 

Good trading to you all.

 

- Spydertrader

 

The definition of fractal is not what is the issue here. Rather, it is your assertion about the existence of "sequences of volume" that must "complete."

 

You wil need to provide a much more detailed account of what you are asserting for that assertion to have the character of proof, rather than character of a mysterious scroll that only the initiated may translate.

 

Best Wishes,

 

Thales

[JBWTrader 10]

Hi SpyderTrader

Your last post I found very interesting...I can spot the Price fractals and estimate their ratios and have spotted the common repeatable pattern but given your statement that Volume leads price this would also mean those (maybe different in nature also) fractal patterns also exist in volume and actually proceed the price fractals.

 

Very interesting indeed....I have been focussing soley on the price fractals..

 

Something else to look at so thanks very much for that.

 

Best

John

[pmxgs0 10]

I've said in other threads in other forums over the years that unless the participants in a discussion agree on the meanings of terms, most recently, "fractal", the discussion may generate lots of heat but little to no light.

 

Clearly there is no general agreement here on what is meant by "volume". That's why some of the statements seem so, shall we say, untenable. I've seen threads like this go on for literally hundreds of posts without anyone ever agreeing on just what it is they are talking about.

 

Given the collective intelligence and experience of those who are involved, it seems like such a waste.

 

Hi Db,

 

have you tried to use only price action to analyse the charts in Forex spot market (or any other market for that matter)? (I'm asking this because we can't get volume on the spot forex)

If so what are your findings?

 

thanks

[atto 20]

Support and Resistance works the same. Another alternative is currency futures, which do have volume (and are exchange traded, so you know you're getting a fair deal).

[DbPhoenix 42]

Hi Db,

 

have you tried to use only price action to analyse the charts in Forex spot market (or any other market for that matter)? (I'm asking this because we can't get volume on the spot forex)

If so what are your findings?

 

thanks

 

Since this is a thread on volume, the question is not what you'd call "on topic". But I will point out that Wyckoff regularly used P&F in his intraday trading, and P&F doesn't use volume. Therefore, I see no reason why Wyckoff cannot in some way be applied to forex.

 

You need to talk to Flojomojo (use the Contact Info tab to send him a PM). He tried to get a thread started in the Wyckoff Forum on just this subject but could not drum up any interest. Perhaps it's time for a new assault.

[BlowFish 10]

Another example they are easy to find as they work more often than fail. I snapped this one 'real time' and then another chart with how it panned out. It was further propelled with what I guess was news at 8.30 eastern.

[thalestrader 14]

Another example they are easy to find as they work more often than fail. I snapped this one 'real time' and then another chart with how it panned out. It was further propelled with what I guess was news at 8.30 eastern.

 

 

Hi Blowfish,

 

Thank you for sharing this here. I do believe that your use of volume can be helpful and does provide potentially useful information.

 

My question about the opportunity reflected in your charts is this: Where and how do you enter this market? And how do you manage the trade? Are you entering at the market based upon the existence of the volume spike, or are you entering based upon subsequent price movement?

 

Respectfully,

 

Thales

[BlowFish 10]

Thales, I draw S/R on a 60 minute chart to give context (and a bit of directional bias, DAX is down today, actually running out of lines on the current contract and might have to use the cash!). My trading chart is a 5 minute I draw a few lines here horizontal and trend with the occasional outside channel line. It is here I look for trades with decent location. Really I could stop there (and sometimes think I should) but I do mess with ways of judging 'order flow'/'buying selling pressure' call it what you will.

 

The current flavour of the month is this 15 second DAX with volume. I am growing to like it in fact I have a strong hunch that one might be able to scalp from it alone without much regard for 'context'. I am sorely tempted to put together a simple scalp strategy more (maybe solely) focused on the 15 second chart. It just seems to be working real nice on the DAX right now.

 

I tend to be a bit of a scalper anyway, I do try to hold half for longer, frankly I'm just not that good at it. Still here is the 5 min chart with a few lines on. The short brown ones are entry and two exits (based on previous swings). Of course break out guys like yourself would be in a few ticks past them and you can see what happened!

[thalestrader 14]

I tend to be a bit of a scalper anyway, I do try to hold half for longer, frankly I'm just not that good at it.

 

Then again, if you are trading off of a 15 second chart, a 5 minute hold would just about qualify as a long term investment!

 

I still struggle with holding for my stops. I cannot say that it is easier for me to do so now, but my will has strengthened enough, and I have seen S/R work so well for so long now that I can resist the temptation, most of the time, to take the money and run.

 

Good stuff, and thank you for your charts - I'm a visual learner myself, and I find a chart always helps me understand another's approach better than words alone.

 

Best Wishes,

 

Thales

[BlowFish 10]

I always bought into the rule of thumb of having charts separated by about 5 -7 Times. Using the 15 seconds as a pressure gauge it doesn't really seem to matter that its a long way removed (20 times) from the 5min. In some ways it makes it easier to 'snap back out of it' as it is kind of 'abstract'. Interestingly you do see the same sort of patterns develop (as you might expect).

[brownsfan019 17]

Wow, thread really got going. Amazing how some great things can come out if you just let them. No need for overzealous mod's to shut threads down.

 

There's some great info presented here and that's all my intention was. I thought the other thread on volume had some promise but it was quickly shut down so I started this one.

 

Keep it up guys.

 

 

Given the collective intelligence and experience of those who are involved, it seems like such a waste.

 

If my little area & this thread is beneath you DB, please feel free to show yourself the door and head back to your area. As my first post stated, this thread is to discuss volume where a mod isn't going to shut it down. A place where people can post w/o worry of a thread being closed, moderated or changed in any way. I'm trying this new radical thinking when moderating an area.