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TinGull

[Volume Based Candles] and how to profit

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Robert

Insert--Activity Bar--Candlestick VolAccum

 

There are a bunch of settings, but I have never used it so I cant help you there. Im sure theres some stuff on the TS forums if you have questions.

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I've been reading thru this interesting thread for the last hour and many interesting arguments were raised.

 

The argument against VBCs started by Walter is pretty intriguing to say the least.

 

If all candles represent the same volume, then from a merely technical point of view VBCs annihilate the importance of volume simply because volume is evenly distributed.

 

In all honesty, I must admit I never really found volume useful in my trading. When many dojis appear and the market is ranging, I don't really need volume to tell me we are in a choppy slow market.

 

On the contrary, when markets take out important support/resistance points, there certainly will be a volume spike on the breakout simply because many orders have been parked around those areas waiting to be triggered.

 

I've taken a look at VBCs and I liked their visual impact. They look cleaner than regular charts.

 

I believe VBCs are useful because you know what you get for each candlestick printed on the chart. All you gotta do is interpret the price action and be better focused on the actual pattern signals, while trading off time charts you have to worry both about the patterns and volume.

 

I think the key here is to ideally come up with the perfect fit for your trading style in setting up the volume #. How much weight do you want to give to each candlestick?

 

I tried with 500 because I usually trade off the 2min chart. I found it pretty decent and I must say it's really fast around the open and news times, when many contracts are exchanged. By the way, I am referring to YM.

 

All in all, I am going to keep this chart next to my other time charts and use it as an extra analytical tool. I think it could turn out pretty useful when markets are moving fast and I need to act quickly.

 

Something that wasn't mentioned in this thread and that I would like to point out:

 

When you get wide range candlesticks with VBCs, how do you interpret that?

 

If volume is the same for all intervals, why would certain intervals have a wider range than others?

 

I think it could be a thin DOM, letting prices run thru levels faster...

 

...or the majority of traders pushing the market in one direction...

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Italian: True volume analisis requires Weight.... the only weigth analisis you can put to vbc is time, if you dont use that weight, then its not volume analisis, its a "price action (volume) constructed chart" and you are analizing only price action, wich is OK.. like candle patterns etc... but not really volume analisis.... the fact that the candles are constructed from volume doesnt mean volume analisis.... per example I use tick charts to see the "price action (tick ) constructed chart"... they look very diferent to time based charts and that is a true edge on VBC.. they are not waiting for time to construct a bar.... now thats so diferent to any volume weight analisis... dont get me wrong... vbc`s as tick charts make much better easy to read charts....

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Walter

 

Yes, what I particular like is the visual representation of what' going on...that's pretty much all...

 

VBCs like anything else aren't the holy grail or won't make you profitable if used alone.

 

It's like watching a football game on HDTV...you can see it a little better than on regular TV, yet the outcome of the game won't change.

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Sharp - welcome to the discussion. Here's what I found very useful from your post:

 

* I've taken a look at VBCs and I liked their visual impact. They look cleaner than regular charts.

 

* I believe VBCs are useful because you know what you get for each candlestick printed on the chart. All you gotta do is interpret the price action and be better focused on the actual pattern signals, while trading off time charts you have to worry both about the patterns and volume.

 

* I found it pretty decent and I must say it's really fast around the open and news times, when many contracts are exchanged.

 

I think those 3 points summarize VBC's well for a new person looking at them. I personally only use VBC charts in my analysis as I have found them much more reliable for my style of trading.

 

I've mentioned this here, but after reading the 3rd point I highlighted here - if you attempt to use VBC's in your trading, you must be focused and ready to pounce on trades that appear. You do NOT have time to 2nd guess yourself, esp during fast printing times. The best analogy I have tonight is you need to act like a cheetah lying in the weeds just waiting for your chance to pounce on your prey. You'll have milliseconds to pounce on that prey, but when you do... watch out! ;)

 

As you said, there is no grail. It does not exist. What does exist is the possibility of creating a trading methodology that works for you. Once you find this, you have found your 'grail'.

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Something that wasn't mentioned in this thread and that I would like to point out:

 

When you get wide range candlesticks with VBCs, how do you interpret that?

If volume is the same for all intervals, why would certain intervals have a wider range than others?

I think it could be a thin DOM, letting prices run thru levels faster...

..or the majority of traders pushing the market in one direction...

 

Sharp, this piggybacks on our WRB discussion here - http://www.traderslaboratory.com/forums/f34/wide-range-bodies-big-candles-1480.html

 

I think the WRB's are the result of a momentary imbalance between the bulls and the bears. I have not seen any correlation to a thin DOM, actually quite the opposite. WRB's usually form when there is high volume and action taking place. Keep in mind that the 'high' volume I am referring to is relative to the immediate trading taking place. In other words, we may get a 'high volume WRB push' but in the context of the overall day, this may be 'low' volume.

 

If you are going to watch these in real time, you'll see what I am talking about. I can't stress enough how important and eye opening it is when you watch VBC charts form in real time, esp at the open and around news as Sharp mentioned. It's amazing at how quickly candles will print during those times.

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I think a point that is worth mentioning is finding the best volume per candle to trade upon, for your trading style. Most of you guys are trading the YM where Joe can say to Bob, "Look at the X vol candles". I'm trading stocks. The volume can vary a lot. Have too small of a volume candle and get burned. Have a too big of a volume candle and miss many trades.

 

For stocks, I actually think you need to watch for a day or two or figure out that an average volume of X = a candle volume Y and set it to that. One particular volume setting does not work for for all stocks.

 

I know this may seem elementary to some but I had to learn this the hard way switching from time to volume.

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That's a good point Robert. Again, as I've tried to stress here, make sure you watch these VBC charts in real-time for days/weeks before putting any real money on the line. And Robert hit the nail on the head that each instrument is different and will react differently based on the settings that you chose. There is no perfect answer to the question - what should I set my VBC chart at. What works for me or Robert may not work for you.

 

Test, test and test some more until you prove to yourself that either you like the VBC's or don't and then prove to yourself what setting you like the VBC at for each instrument you trade.

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With the current volatility it may be a good idea to revisit VBC's if you find yourself saying "There is so much movement on my minute chart!".

 

I have/had been using 3 minute charts to trade the ES and w/ this volatility recently, I am finding trades are requiring 4+ pt stops. For me, that's a bit much. I'm willing to risk up to 2.5 normally and normally that would work fine on a 3 minute.

 

I am currently running a 5000 VBC chart on the ES. That may be a bit fast for some, so play around with some settings to see if a VBC could help you more in this trading environment. This is where being a human trader in the game each day has it's advantages over a computer program. How long would it take for a computer program to realize that a 3 or 5 minute chart is just not working in the current environment? ;)

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This is where being a human trader in the game each day has it's advantages over a computer program. How long would it take for a computer program to realize that a 3 or 5 minute chart is just not working in the current environment? ;)

 

Very good observation.

 

In fact, during periods of high volatility most of traders tend to experience periods of large drawdowns.

 

This is due to indicators being off, mathematical/statistical systems needing days to adjust, etc...

 

The advantages of discretionary trading is that you have very little delay in adjusting to new market conditions.

 

Give me high volatility any given day!!!

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Just a little update here on the VBC efforts - I am still chugging along with them. It seems that when the thought comes to stray back to minute charts, I am quickly reminded that for me, there are many benefits to the VBC's as outlined in the thread.

 

One thing that has really stood out to me when comparing the minute vs. VBC chart is the size of my stops. In a 5+ minute chart, there could be a good looking pattern, say a hammer, but requires a rather large stop. And by large, I am referring to anything over 2 ES points. For some, that's not a big deal. For me, I would prefer to keep the stops under 2 ES pts initially. The easiest way I have found to do that is to utilize the VBC's. With the VBC, even on higher settings, I am keeping most stops below 2 ES pts.

 

As for the settings to use on the ES, it's all over the board. I've played with 2000, which is requires incredible focus, up to 50,000 which I like right now. It's a function of the volatility and current volume as well.

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I spent the hour or so reading all the post on this subject and now I am totally confused. Has anyone come up with a good average starting point or average for the number of share bars and what moving averages are you using?

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I say, take the issue you like trading be it YM, ES, ER....and find a time frame you feel comfortable with. Like trading a 5min chart, for example. Take the average volume coming through on a 5min chart and use that as a starting point for your VBC charting.

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I spent the hour or so reading all the post on this subject and now I am totally confused. Has anyone come up with a good average starting point or average for the number of share bars and what moving averages are you using?

 

For starters, the thread is about VBC's, not moving averages.

 

As has been stated throughout the thread, there is no perfect starting point for where to set your VBC. It depends on YOU. No one can answer the question for YOU. YOU have to spend some time with them and see what works for YOU.

 

Get the idea?

 

You can go as low as 2000 up to 50,000+ on the ES in my opinion. That's a big range obviously, so there's no way for myself or anyone to tell you where to start. If you want to see how they look, you'll have to spend some time playing with them.

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Just as an aside you might wanna take a look for posts by Bill Shamp (he posts as ProfLogic and another pseudonym I can't remember off hand, CharlieChan or something) over at Ellite Trader (dont stay too long it will corrupt your mind).

 

He is a long time proponent and vocal supporter of constant volume bars. Amongst the dross you will probably find everything you could possibly wish to know about them.

 

I use them for some applications but in others I find time important. Brown says he likes to see a good skirmish between bulls and bears (as do I!) but market participants withdrawing and price 'drifting' can tell a story also (a story that gets lost with constant volume bars). Some like to view 'corrections' for example as corrections in price or time, corrections in time tend to get lost in constant volume charts.

 

This is not meant to be a criticism of CV charts - they are great for all sorts of things- Know your tools I guess am saying :)

 

Cheers.

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Just as an aside you might wanna take a look for posts by Bill Shamp (he posts as ProfLogic and another pseudonym I can't remember off hand, CharlieChan or something) over at Ellite Trader (dont stay too long it will corrupt your mind).

 

He is a long time proponent and vocal supporter of constant volume bars. Amongst the dross you will probably find everything you could possibly wish to know about them.

 

I use them for some applications but in others I find time important. Brown says he likes to see a good skirmish between bulls and bears (as do I!) but market participants withdrawing and price 'drifting' can tell a story also (a story that gets lost with constant volume bars). Some like to view 'corrections' for example as corrections in price or time, corrections in time tend to get lost in constant volume charts.

 

This is not meant to be a criticism of CV charts - they are great for all sorts of things- Know your tools I guess am saying :)

 

Cheers.

 

Fish - That is where I first learned about them and quoted the source here - http://www.traderslaboratory.com/forums/34/volume-based-candles-and-how-to-1414-3.html#post7813

 

Just giving credit where credit is due.

 

As you said, there's many ways to construct your chart and many ways to interrupt them so it's a matter of personal preference and what produces profitable trading opportunities for each trader. For me, it's been b/c of VBC's. For others, they prefer other settings. It really doesn't matter as long as it makes YOU money! ;)

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Ahh OK pardon me I must have missed that maybe it was on the other VBC thread. Actually I have been travelling a lot recently and probably just missed it. Of course the good prof didn't invent these bars or anything he's just a vocal proponent as I said.

 

Quite right, many ways to skin a cat, glad you have found your own particular knife. Personally I quite like them with some what larger value bars to smooth out overnight session and lunch time doldrums to get the bigger picture. I also quite like using them with Drummond Geometry.

 

It's kind of interesting to see how things change for example with Drummond 59's often turn into 53's. With candles A WRB often turns in to three white soldiers. (of course it would do if it was a high volume time based WRB). If you get a WRB bar on a CV chart it means something quite different to on a time based chart (it after all needs a large movement on relatively low volume to form).

 

Interesting to see where you go with all this.

 

Cheers.

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Ahh OK pardon me I must have missed that maybe it was on the other VBC thread. Actually I have been travelling a lot recently and probably just missed it. Of course the good prof didn't invent these bars or anything he's just a vocal proponent as I said.

 

Quite right, many ways to skin a cat, glad you have found your own particular knife. Personally I quite like them with some what larger value bars to smooth out overnight session and lunch time doldrums to get the bigger picture. I also quite like using them with Drummond Geometry.

 

It's kind of interesting to see how things change for example with Drummond 59's often turn into 53's. With candles A WRB often turns in to three white soldiers. (of course it would do if it was a high volume time based WRB). If you get a WRB bar on a CV chart it means something quite different to on a time based chart (it after all needs a large movement on relatively low volume to form).

 

Interesting to see where you go with all this.

 

Cheers.

 

The reference was made in this thread, but just earlier in the thread.

 

You hit the nail on the head - VBC's smooth everything out. And if that works for you, as it does for me, it's invaluable to trading. Like you said, the overnight session and lunches are presented in quite a different light. As mentioned in the thread, I also love how these react around news announcements b/c it gives me the opportunity to get into a trade instead of waiting for a minute chart to form and then giving me a monstrous candle. I think there's some examples somewhere here, but it's worth looking at in my opinion for anyone reading this. Just open a minute chart and then open a VBC and see how things look to you!

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Brownsfan,

Having read this & the entire thread on elite trader I was wondering if you use anything else with the voume candles ( as prof logic does on elite trader) to assist or just the candle formations/patterns alone?

Mitch

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Brownsfan,

Having read this & the entire thread on elite trader I was wondering if you use anything else with the voume candles ( as prof logic does on elite trader) to assist or just the candle formations/patterns alone?

Mitch

 

Good question Mitch. I mainly use the VBC's for intraday trading to smooth the charts out. I am a candle trader by nature, so the VBC's seem to be a great fit with them. I'm mainly looking for strong candle patterns at support/resistance levels. I also want to be in trades when things are moving and the VBC allows just that.

 

Make sure to watch a VBC today before the Fed announcement and you will really see how these work in fast moving markets.

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JUST A REMINDER:

 

IF YOU REALLY WANT TO SEE THE POWER OF THE VBC, SET UP YOUR CHARTS TODAY BEFORE THE FED ANNOUNCEMENT AND JUST WATCH HOW THE VBC LOOKS COMPARED TO A MINUTE OR TICK CHART.

 

Today is a perfect example of how these can REALLY work.

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    • Thanks for your suggestions man!! Our own decision surely makes us or breaks us. Thanks once again, buddy.
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