[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.

[Tannism]

Hi Firewalker.
Here is a NZ chart I click through once in awhile. It shows volume and issues traded differences for about a decade.

The bottom box is the isssues/vol ratio.

TannisM

[Tannism]

We have a little Mamis divergence in up and down volume approaching the yearly lows.

[matinthehat]

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

Greetings,

Below I have stated my ideas on volume. I was wondering if you could read through it and point out my mistakes and supply me with your opinions.

Thanks.

What is volume?
Volume is the number of contracts that have been traded between a BUYER and a SELLER.

What is your take on volume?
I refer to the market as a ladder (like the DOM). Sellers chewing up BIDS is my idea of SELLING pressure. Buyers chewing up OFFERS is my idea of BUYING pressure.

What does low and high volume mean?
Low volume means that there is little participation. High volume means that there is a lot of participation (on one or both sides (depends on the pice bar)). Excessively high volume means that there is a lot of participation on both sides. (Below when I say HIGH volume I am referring to excessively HIGH volume)

On a BIG up bar with low volume, what does this mean?
It could possibly mean that there was little SELLING pressure as there was a small amount of contracts traded (remember a contract needs a buyer and a seller or it is not volume). It is also indicative of great BUYING pressure. This situation was caused by a lack of sellers and the buyers having to up their price in order to attract sellers.

On a SMALL up bar with low volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but the difference was dismal. This could be indicative on buyers and sellers seeking equilibrium.

On a BIG up bar with high volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but there was still a significant amount of sellers, or the volume would not be so high.

On a SMALL up bar with high volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but the two forces are very close indicating equilibrium.

On a BIG down bar with low volume, what does this mean?
It could possibly mean that there was little BUYING pressure and great SELLING pressure. There was a lack of contracts traded indicating that sellers in order to attract buyers had to reduce their price significantly.

On a SMALL down bar with low volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but the forces are close and both sides could be seeking equilibrium.

On a Big down bar with high volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but there was still significant BUYING pressure.

On a SMALL down bar with high volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but the difference was small as both sides could be seeking equilibrium.

[atto]

Here's what I just said in chat, for anyone who likes to follow along:

[09:13:44] atto: mat, I haven't finished it, but you might catch some flak for "bar" type analysis. The market doesn't care what's a bar to you (because it's different due to different timeframes, time differences, etc).
[09:14:04] atto: So, you might be able to apply this more successfully to price movements
[09:14:13] atto: So a large movement on smaller volume (no matter how many bars)
[09:14:20] atto: Or vice versa

[matinthehat]

I could not stay in chat because i am currently at my school and I would be burned at the stake for doing such a thing on public computers. Maybe sometime on the weekend (whenever) some people could get together with me and have a big price action dsicussion in the chat room. I can not participate in the morning sessions as i am always at school.

[DbPhoenix]

Originally Posted by matinthehat »

Greetings,

Below I have stated my ideas on volume. I was wondering if you could read through it and point out my mistakes and supply me with your opinions.

Thanks.

What is volume?
Volume is the number of contracts that have been traded between a BUYER and a SELLER.

Fine, though you needn't include the buyer and seller part.

What is your take on volume?
I refer to the market as a ladder (like the DOM). Sellers chewing up BIDS is my idea of SELLING pressure. Buyers chewing up OFFERS is my idea of BUYING pressure.

Following the bid and ask is also fine, but not necessary. You can just follow price's progress up or down.

What does low and high volume mean?
Low volume means that there is little participation. High volume means that there is a lot of participation (on one or both sides (depends on the pice bar)). Excessively high volume means that there is a lot of participation on both sides. (Below when I say HIGH volume I am referring to excessively HIGH volume)

Actually, there is participation on both sides regardless of how high or low volume is. The degree to which it's "high" reflects how much participation.

On a BIG up bar with low volume, what does this mean?
It could possibly mean that there was little SELLING pressure as there was a small amount of contracts traded (remember a contract needs a buyer and a seller or it is not volume). It is also indicative of great BUYING pressure. This situation was caused by a lack of sellers and the buyers having to up their price in order to attract sellers.

On a SMALL up bar with low volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but the difference was dismal. This could be indicative on buyers and sellers seeking equilibrium.

On a BIG up bar with high volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but there was still a significant amount of sellers, or the volume would not be so high.

On a SMALL up bar with high volume, what does this mean?
It could possibly mean that there was more BUYING pressure than SELLING pressure, but the two forces are very close indicating equilibrium.

On a BIG down bar with low volume, what does this mean?
It could possibly mean that there was little BUYING pressure and great SELLING pressure. There was a lack of contracts traded indicating that sellers in order to attract buyers had to reduce their price significantly.

On a SMALL down bar with low volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but the forces are close and both sides could be seeking equilibrium.

On a Big down bar with high volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but there was still significant BUYING pressure.

On a SMALL down bar with high volume, what does this mean?
It could possibly mean that there was more SELLING pressure than BUYING pressure, but the difference was small as both sides could be seeking equilibrium.

Also all fine, though you can leave off the "possiblys". However, if you focus on the bar, you may miss the whole point of this approach, which is to focus on the flow, not the bar. This isn't about snapshots. It's about a movie. If you find yourself perseverating over what a particular bar "means", change to line charts and follow the price flow. Price rises, more buying pressure. Price falls, more selling pressure. Volume reflects the extent of participation. And that's about it. If that doesn't click with you, you will more likely be happy with an approach that stresses the bar.

Attached is an example of what I mean by a "line" chart.