The Price / Volume Relationship

[The Price / Volume Relationship]

Gaussians must match your trend lines.

In case this seems arbitrary or counter intuitive, since gaussians are supposed to define the channel -- not the other way around, this statement reflects the often inexact nature of our 5 minute market lens and the need to account for that rather than blindly go by what the chart says. If you use your imagination to look into the 5m bar and think through what happened, and where the dominant volume was, your gaussians will match your trend lines.

[The Price / Volume Relationship]

I'm stuck. Today, March 23, at 14:50, the 2 min YM began a run up that lasted for about 8 minutes. At the same time volume was decreasing. This was indicative of a black non dom retrace in a red channel, but it was a dom move in a black channel. Therefore, this would suggest I was on the wrong fractal. But if there is another larger red fractal that makes sense of this, I can't find it. What am I missing? Any explanation of this would be helpful to me. TIA.

 

Look at the range, open, and close of each of those bars on decreasing volume. The range is getting smaller, and the close is getting lower and lower on the bar. In other words, the 2m bars are becoming less and less "black" as the balance between buyers and sellers shifts. If you were looking at 30 second bars, you'd probably see a B2R2B2R2B2R2B-ftt-2R2R. Not that you should look at 30 second bars... but the price action is telling a story.

 

Looking at 5m ES bars, you see the same thing play out all the time.

[The Price / Volume Relationship]

Great post. I am a 25 year student of volume and range analysis and I would urge that all volume is not created equal. In other words, volume seems to have some analytical or predictive value only when the volume correlates to an instrument that is not dependent on the price movement of another instrument. For instance, the ES (Emini S&P 500)--when the S&P 500 Cash Index is increasing in price, the ES will follow, regardless of the volume. A multitude of program traders assure the price of the two instruments stay within fair market value of one another. But this cannot mean that the ES volume holds predictive value for the cash index it follows. With that said, it can reasonably be argued that the ES influences the cash market prior to the cash market opening. But that influence is shortly lived. In the end, and as the old saying goes, cash is king.

 

The people here can get a little touchy Thanks for posing an extremely interesting question. Though volume is always useful, I have found it useful in oddly different ways depending on the instrument being traded (i.e. tick volume on Forex). This tells me that there is a fundamental difference in what's going on, but I don't really know what. I guess I don't really care either, but it's interesting to think about.

 

Something to ponder: Despite the fact that there are arbitrage systems out there keeping the cash and futures in line, you can admit that there are traders of ALL TYPES on the ES, trading for entirely different reasons and using different techniques. This means that there are all kinds of orders floating that may or may not be paying explicit attention to the cash index. When price MUST pass through an area because an arbitrage opportunity, it has to pass through those floating orders. That prints as "volume". If we see a lot of that, we know which direction the market is moving in, resistance be damned. Thankfully, the market tends to move in waves, which creates opportunities if you are confident in its current direction.

[The Price / Volume Relationship]

I'm partway through this thread, so excuse me if this has been covered, but if any other contributors to the thread have or would like to start a chat room to discuss critique execution, please PM me.

[The Price / Volume Relationship]

Looking at this, how would you have known that any bar after bar 68 would/could NOT be the BO of the thick red down container? Or maybe it was?

 

The answers are somewhere within:

 

a) Order of events

b) Peaks and throughs

c) Lateral

d) Fractal nesting of containers

e) Gaussians

 

In THIS example I was "confident" that we would end up the way it is right now. However trading it with real money I would probably had been whipsawed.

 

By now maybe some of you already start to see how they would know that they know what must come next. I hope to join you soon.

 

Good luck.

 

Bars 65-68 show a lot of strength. On 65, you've got a high volume bar closing in the middle, followed by sideways movement in 66/67. You get your increasing black on 68. Time to move up. Bar 69 was a little weak in the volume department -- for a breakout we would have needed to see an increase. As the buyers dry up, sellers take over again, but find support -- giving you a point 3. This movement fails to sustain itself on the next bar though, suggesting again that there's no follow through here. The bar 72 FTT is confirmed and the channel starts to roll over.

 

If you haven't exited by 74, you're exiting/reversing for sure at 76.

[The Price / Volume Relationship]

Now it is clear. But would you have seen it in real time? What were the clues?

 

My problem with this is anticipating a BO/FBO based on trendlines drawn from bars 39, 40, and 41, which have a collective range of what, a point and a half?

 

In my mind, as bars 45 and 46 are heading lower, we're looking for our "point 3" -- waiting for the market to double back and verify that "yep, enough sellers are gone now, buyers are in control" so we can draw our up channel. Anticipating an FBO here is in my mind a classic example of "looking too hard at the chart".

 

Later, on bar 55-56, we have increasing volume, but there is clearly a lot of supply/resistance here judging by the increased volume and the bars closing near the middle. I would be more likely to expect a BO after an FTT here.

 

[The Price / Volume Relationship]

Good timing... I've been lurking here for a little while after a multi-year hiatus. Weird to think that people still watch those videos... Those were made a lifetime ago. Personally, being in the leaves (trading tapes, labeling every hitch/dip/etc) psyched me out, so I strived to simplify and use what made intuitive sense to me. That's what I've had the most success with personally, but take that with a grain of salt because my trading record is very short -- my work has a way of keeping me too busy to trade. Lately, I've tried to carve out a little time in the AM for trading and I'm hoping to spend more time here. I've been thrilled to discover that some of the other stuff in these forums that is price/volume related (like VSA) actually backs up / further explains a lot of what folks are doing here, adding context/confidence/understanding to the basics of p/v/channels/ftts. Quite a different environment than EliteTrader.

 

My attitude towards Spyder's futures threads here and at ET is that his training and exercises put you in front of a chart, paying close attention, for enough hours that you will eventually figure out how to trade. Last I checked he doesn't lay out an exact method for entries/exits -- just shows you how to read what you're seeing and keep your head in the game. It might be a mistake to treat this as a method for trading when really it is a method for learning how to trade.

 

Ok, general question:

 

You guys know the video by Eric Wilson where he trades the RTL breakout, not even the FTT's? Very basic stuff it seemed (he says "I do not tape" in the video), and apparently stays pretty much in one fractal for 2 to 4 major turning points per day, always in until he gets a TL Break with R2R or B2B. (Since then, It seems that since then the method has changed a lot- there even used to be indicators etc, it has also gone micro, breaking it down into the smallest parts).

 

My questions are:

1. It seems that Eric was successful doing this. Am I wrong in this? (If he was successful, does anybody have some contact info for him, PM me)?

2. Are there people on this board that can trade profitably the way Eric did?

3. Gucci says above that at the beginning, Spyder was "jumping fractals". Apparently, however, Spyder could still trade successfully doing so. Is this correct or am I wrong?

4. If so, is there anybody here who trades the way Spyder originally did in the ET thread, and with success?

 

You see where I am going... it might be much more profitable to trade it the way presented here, but perhaps the easier way for me is to approach it from coarse to fine..

 

Thanks!