Trading Futures Using Volume

[86834 10]

I'll throw in my 2 cents as usual.....

 

As with all my other posts, I'm always banging on about order flow, because you need to learn this first, then build the rest of your trading ontop of it. However, lets say you already know order flow, then you can start to use other support tools such as technical analysis and basic volume to identify key areas to be trading.

 

Now a basic, yet very effective way to use volume is to look for divergences between volume and price on key time frames. Yesterday was a great example on ES after lunch time... look at the screen shot and you'll see what I mean.

 

Once you know how to read order flow, then basic volume is very effective in presenting you with very strong trading opportunities. Volume is a very broad term with many aspects that come under it, and some people argue that order flow is appart of volume. However order flow gives you the detailed information of exactly what is happening at each price that allows to pin point enteries. Basic volume on the other hand, as mentioned, is excellent as alerting you to key trading opportunities, but shouldn't be used, in my opinion, to try and execute trades. There's a difference between a trading opportunitiy and trade execution, and as long as you use volume correctly then it is a very useful asepct of trading futures. In my opinion, most have problems using volume as ulitmately they're trying to use it for execution, which is why many people get into a trade, get stopped out, only then to watch the market rally to their original exit without them.

 

[Lina 10]

Thanks for yours 2 cents:)

While reading your post I mentioned one more reason why trading attracts me. It gives the opportunity to personalize your own way of trading. Despite the importance of tools which you use, the most important thing is to be in profit.

[86834 10]

Thanks for yours 2 cents:)

While reading your post I mentioned one more reason why trading attracts me. It gives the opportunity to personalize your own way of trading. Despite the importance of tools which you use, the most important thing is to be in profit.

 

 

Completely right.... once you understand the key concepts of how the markets work, then there's many ways for one to make money, and the only right way is the profitable way. The problem with a lot of people is that they don't understand them key concepts of how the markets work.

 

I'ts like a car engine. If you understand how an engine works, then you can fix it, tune it, or whatever tickels your fancy. If you haven't got clue how an engine works, then you could well find yourself stuck at the side of the road scratching your head, when all you need is some gas.

 

I know I can come across as I'm saying my way is the only way, but I don't mean too I'm just emphasising the basics one needs to know before they look into other methods/strategies. To use another anology, trading is like joining the army. At first you gonna do basic training to learn how to shoot and hit a target. After basic training, you then branch over into whatever you want to specialize in. In trading you need to learn how to use the detail volume first to read order flow. Once you know that, then you can learn whatever suits your personally, which could be market profile, fibs, VWAP etc, wave theory and so on.

[Lina 10]

Can you explain what means to you ''order flow''?All orders on buy limit and sell limit?Thanks

[86834 10]

Just following on the post I made about how volume divergences are useful, I made a video of a trade that I took yesterday off the 1181 reistance level in ES. The market traded up to the level on a divergence, then one just needed to read the order flow there to pin point the entry. The video can be viewed here:

 

[ame=http://www.youtube.com/watch?v=AAc1vJREAlQ]YouTube - Day Trading ES 18th October.avi[/ame]

 

You'll need to watch it in full screen to see the detail. I should of recorded it in slightly higher quality, which I'll do for my next video. Also what happens at the 1181 resistance level is a great example of a post on the blog called cat whiskers.

[Lina 10]

Now your point is more clear, thanks!

Of course, I always look at order flow during the trading. But as for me, it is more reliably to look at volume, which is ''already done'', because it's very simple to revoke the order with one click! I'll show you my view using your example on ES

 

[86834 10]

Now your point is more clear, thanks!

Of course, I always look at order flow during the trading. But as for me, it is more reliably to look at volume, which is ''already done'', because it's very simple to revoke the order with one click! I'll show you my view using your example on ES

 

 

What has already traded is great for finding levels, but that's about it in my opinion. Seems like you're using something along the lines of market delta, which is not something i'm a fan of, as in my opinion it suffers from a few fundamental flaws. First of all it suffers from the frame trap as it is plotted just like any other technical chart, and secondly all it is showing you is what is trading at each price, which is only half the story, while on the order hand, your dom tells you everything.

 

To use an analogy, if you're playing poker, it's not soley about what cards you have or what the other players are betting. There's the old saying in poker that you play your opponent and not your cards as you need to work out if they're bluffing or not, if they're trying to buy the pot and so on etc. When you're reading order flow on your book, you're seeing everything you need, that gives you that 2% edge. The margin for error in trading is so small (the speech from any given sunday comes to mind here!), so all them 2%'s add up to make a significant difference. It's the difference between those who are consistent enough and make it, and those who blow out. Like I say the margin for error is so small that you need every edge you've got.

[Lina 10]

To be honest, I don't want to claim that my way of trading is the only right. Sometimes I loose, sometimes I win. I just want to find best practices. As I say before, volume gives me the opportunity to open the position correctly. I want to show you screen shot, which confirms my words. This is my sell on gold.

[icehac 10]

I know a few people that use Volfix and are successful with it. EOC has a similiar feature called 'Footprint'. Not as clean looking, but is able to show volume and bid/ask delta. Nice gold trade btw!

[Lina 10]

Yes, It's Volfix soft. I tried to trade with Market Delta and Bloomberg. Bloomberg is very useful for getting information, but their charts are not very easy for understanding and usable.

[Trendup_ 10]

Just following on the post I made about how volume divergences are useful, I made a video of a trade that I took yesterday off the 1181 reistance level in ES. The market traded up to the level on a divergence, then one just needed to read the order flow there to pin point the entry. The video can be viewed here:

You'll need to watch it in full screen to see the detail. I should of recorded it in slightly higher quality, which I'll do for my next video. Also what happens at the 1181 resistance level is a great example of a post on the blog called cat whiskers.

 

Thanks for the videos, can’t hear any voice, it will be valuable to hear your comments.

[KalixMOR 10]

I tried using volume but now I do again price action only.

[stasbz 10]

I'll throw in my 2 cents as usual.....

 

As with all my other posts, I'm always banging on about order flow, because you need to learn this first, then build the rest of your trading ontop of it. However, lets say you already know order flow, then you can start to use other support tools such as technical analysis and basic volume to identify key areas to be trading.

 

Now a basic, yet very effective way to use volume is to look for divergences between volume and price on key time frames. Yesterday was a great example on ES after lunch time... look at the screen shot and you'll see what I mean.

 

Once you know how to read order flow, then basic volume is very effective in presenting you with very strong trading opportunities. Volume is a very broad term with many aspects that come under it, and some people argue that order flow is appart of volume. However order flow gives you the detailed information of exactly what is happening at each price that allows to pin point enteries. Basic volume on the other hand, as mentioned, is excellent as alerting you to key trading opportunities, but shouldn't be used, in my opinion, to try and execute trades. There's a difference between a trading opportunitiy and trade execution, and as long as you use volume correctly then it is a very useful asepct of trading futures. In my opinion, most have problems using volume as ulitmately they're trying to use it for execution, which is why many people get into a trade, get stopped out, only then to watch the market rally to their original exit without them.

 

 

you mean that using volume we can see the overall picture of the market today (i mean market is strong or weak today ) and decide to trade buy or short when some market technical setup appears . But to enter correctly we must use order flow.?

OR

we use order flow to discover: market is strong or weak and than using technical setups to trade? (of course we use order flow to enter correctly)

[zapisy 10]

Only strong volume, does not mean the market will move in any direction, and in which one?...

 

All the best,

 

Linetrol Development