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Hi, Due to many requests, I'm starting this thread to post the Top Posts and Threads from our newsletter every Tues\Thurs\Sat. I hope everyone finds this useful - feedback is always welcome. thanks, MMS

In this post I plan to present a simplified view of the Volume and Price relationship based on elementary economic theory. First, an introduction to supply & demand schedules for those without any prior understanding of economics. For those of you who are familiar with the economic definitions of supply & demand, you can skip this part. Introduction to Supply & Demand: --- In economics, we think of demand and supply as a schedules, or arrays of price and quantity combinations if you wish. That is, for every price, a certain quantity will be demanded, and likewise, for every price, a certain quantity will be supplied. We assume that the higher the price, the less will be demanded. We assume that the higher the price, the more will be supplied. With these two assumptions, we can draw the supply and demand schedules in a diagram. If the price is on the vertical axis, and the quantity is on the horizontal axis, then the demand curve will be falling, and the supply curve will be rising, as shown in the first figure. In the intersection of these two curves, or when the quantity demanded equals the quantity supplied, we will have reached an equilibrium. All other prices would be unstable. Sidenote: Why is this? Well, if price were any higher, then the quantity supplied would be higher than the quantity demanded. There would be a surplus quantity to which there would be no buyers. Thus, price must fall to attract additional buyers to snap up this surplus. Likewise, if the price were below the equilibrium, the quantity demanded would exceed the quantity supplied. There would be a shortage, and price must rise to attract additional sellers to fill this shortage. What then do we mean when we say "an increase in demand"? What we mean is that for each price, the demanded quantity is larger than previously, or, for each price, the buyers now wish to purchase more of this good than they did before - it has become more dear to them. This can be illustrated by the demand curve shifting to the left, as shown in the second figure above. Likewise, "an increase in supply" means that for each price, the supplied quantity is larger than previously, or, for each price, the sellers wish to dispose with more of this good than they did before - it has become less dear to them. This can be illustrated by the supply curve shifting to the left, as shown on the third figure above. Basic Supply & Demand theory applied to the stock market --- How is this then relevant to the stock market? Well, we're lucky enough that economic theory is general enough that we can apply its principles to any good. An economic good is simply something that people value, of which the total quantity in the world is limited. This certainly applies to stocks. Using a simple supply/demand diagram, like the one above, we can illustrate all the combinations of changes in price and quantity (volume) of a good (stocks) and whether they are the cause of supply and/or demand shifts. For example, the second figure above shows an increase in demand. As we can see, the new equilibrium point is at a place where the price, as well as quantity, is higher than at the previous point. Below is a picture that shows all the different combinations and their impacts on price and quantity. Feel free to study the figure, but skip it if you wish, as it is not extremely important for you to be familiar with it to understand the conclusion. Sidenote: As a guide to examining it, note that: The first row shows the possible shifts in supply & demand that would cause the price to increase. The second row shows the shifts that would leave price unchanged. The third row shows the shifts that would cause price to fall. The first column shows the shifts that would cause volume to increase. The second column shows the shifts that would leave volume unchanged. The third column shows the shifts that would cause volume to fall. Conclusion --- For the conclusion, I will, with the help of the diagram above, explain each of the scenarios in it (from left to right) from a stock market perspective, and with that, what the theoretical explanations for changes in price and volume are. Price rises, as a result of three things: Increased Demand as evidenced by Rising Volume. Note that ONLY demand has increased, while supply is the same. Buyers are more eager to buy, taking the offers, while sellers opinions are unchanged. This results in lots of the sellers shares to be bought and shows up as increased volume. In stock terminology we would call this scenario "offers being taken" or "buying pressure". Increased Demand and Decreased Supply as evidenced by Unchanged Volume. Demand increases while supply decreases, suggesting that both sellers and buyers value the stock more dearly. Buyers lift bids, but sellers lift offers, causing little to no change in volume. Hard to interpret, so let's just call it the result of some "positive event" that is instantly acknowledged by both buyers and sellers. Decreased Supply as evidenced by Falling Volume. Supply decreases while demand stays the same, suggesting an unwillingness to sell. Price rises as there is less supply, but buyers opinions are unchanged, so there are fewer shares transacted (as there are not as many buyers at the higher price). We would call this scenario "offers being raised", or "selling drying up" Price remains unchanged, as a result of three things: Increased Demand and Increased Supply as evidenced by Rising Volume. Buyers are more eager to buy, lifting bids, while buyers are more eager to sell, lowering offers, so price remains unchanged, but a great number of transactions happen. We would call this scenario in the stock market for "change of ownership" No changes happening as evidenced by Unchanged Volume. There is nothing to impact the supply and demand schedules. Bids and offers are left in place. We would call this for something along the lines of "no new information" entering the market. Decreased Demand and Decreased Supply as evidenced by Falling Volume. Buyers are less eager to buy, while sellers are less eager to sell, so liquidity falls. It's hard to interpret this one, but it could be the result of "indecision" in both camps. Finally, price falls, as a result of three things: Increased Supply as evidenced by Rising Volume. Sellers are more eager to sell, so they are hitting the bids, while buyers opinions are unchanged, causing a lot of the buyers orders to be taken, and subsequently an increase in volume. We would call this scenario "selling pressure". Increased Supply and Decreased Demand as evidenced by Unchanged Volume. The inverse of the situation where price rises on changed volume. Here it falls because both buyers and sellers hold the stock less dear. Sellers try to sell, but if both buyers and sellers instantly acknowledge the "negative event", the bids will already be lowered, so we won't see an increase in volume as in the previous scenario. Decreased Demand as evidenced by Falling Volume. The last possible scenario. Buyers expectations fall, so they lower their bids, but sellers opinions are unchanged, and as a result, fewer shares change hands (as there are fewer available at the lower prices. We would call this scenario "buying drying up" For a quick reference, I have summarized these scenarios in two matrices, one with the participants actions, and the other with the scenario names: Applications --- What in the world can this be used for then? Well, as a simplified theoretical model it is of course not extremely realistic. Even if it were, we know that economic science can not offer quantifiable predictions, so it would still be pretty useless. My thought is that it should be used as a framework for interpreting price and volume changes and their interrelations. It can also be compared to other theoretical approaches to the stock market, either strengthening or weakening their conclusions, or to interpret the use and validity of certain indicators that use volume and price.

A nice easy visual to see if there's more buyers than sellers. The green is the total volume, with the red the down volume and with them being overlapped you can always see how much buying compared to how much selling. Import the ELD and it will probably just show two lines. Just right click and format the indicator, switch the colour on the volume to green (down Volume already red). Then switch the style to histogram on both and adjust the weight of the lines. Remember to press the default button, so you only have to do this once. This only works on intraday data, daily charts don't work. Enjoy Blu-Ray UpDownInd.bmp UPDOWNINDICATOR.ELD

PRV -- Pro Rated Volume For the volume hawks! This indicator projects the volume at the end of the bar. It calculates the PRV based on the current trade pace, and the time remaining in the bar. This information is useful to spot turning points ie. whether the money is drying up... or flooding in. This indicator is usable on minute charts only. Instructions: Set the volume to display as a thick histogram and the PRV to display either as a thin histogram, or as a thick point. PRV_ProRatedVolume.txt

Price Action Trainer This indicator helps the new traders to tune-in to the price bar formations as the market unfolds. It reads the Price Action at the micro level, then prints the formation names on the screen. Formations: ib = Inside Bar FTP = Flat Top Pennant fbp = flat bottom pennant ccc = congestion, convergence, centering This indicator is in beta; comments and suggestions are welcome. I will collect all the suggestions and make an update when possible. You are invited to post your renditions as well. If you want to be notified of updates, please make sure you press the "Mark as Installed" key. The code should run in MultiCharts and TradeStation, but I am not sure about OEC. I have uploaded a PLA file for MultiCharts. TradeStation users: if you don't know how to import the code into your software, please spend 5 mins on your users manual to find out how. Price_Action_Trainer_(MultiCharts).pla Price_Action_Trainer.txt

Hello everyone, I'm a beginning trader. I've spent the last year studying trading and I would love to have some practical experience before I begin to trade. Are there any experienced trader(s) in the Atlanta metro area willing to show me the ropes? Thank you.

Wanted to post a few trades I did for March 14, 2007. The first chart is the opening play. Notice the first opening 5 min bar that occurs on decent volume. Price lifts quickly for 25+ points. However, notice the second bar. Volume diminishes indicating a lack of demand. This was my first signal. The third bar is the most interesting bar. Notice the rise in volume with price decline? This indicates a clear supply. The fourth bar was my short trigger when it moved below the close of the third bar. The second chart shows a failed test of the previous opening high on low volume. Notice after price makes a swing low and rallies, the volume diminishes. This is a powerful signal that I love to watch for. The third chart shows the same exact concept as the second chart. Weak volume on a rally and instand rollover. Also notice the resistance at the 12100 level.

Hi! I trade futures using volume.Is there anybody here who trades futures by analyzing volume?

Ok I see a ton of threads degenerating into a 'vendor' bash ... so here is a thread for all of you to give your opinion on vendors. I'll be reviewing this thread for feedback. And if I see good threads going down a wrong path, I will also be moving offending posts here so people can continue those discussions outside of the main thread. thanks! MMS

Hi all! I am new here on the forum (as you can see ), but anyway .... When reading through various forums (here, and other forums), there are quite a few posts regarding algo / quant strategies for stock trading. However, there are not much regarding algo / quant strategies for stock index futures. So, my question is what type of "popular" strategies for stock index futures there are, if any. I obviously do not ask what specific strategies anyone is using, but what types of strategies are being used and considered working good for stock index futures. Thanks! Niels

After trading a little less than two years (just getting my feet wet), I'm beginning to take a step back from the TA, price action, patterns, MP etc., and find myself asking the age-old question - what moves prices? At the macro level I understand there are several factors that include fundamental and technical, that drive price changes; however, at the micro level, is it unadulterated and pure supply-demand?

Hello, I find myself always buying when the stock jumps and I get caught holding at a really high price. It limits my gains obviously or i have to take a loss on a sell off that hits my stop. When shorting, I find myself having the same problem. I short at the lows and have to cover for a loss. how can i fix this problem? need help. thank you!

Hello, I use the attached MC code to calculate the daily pivot points automatically. This calculation works very well when the session starts and ends in the same day (as an example, for futures on CAC40 (FCE), which opens at 8.00 am and closes at 10.00 pm in the same day). But for futures such as crude oil (CL), which opens at 6.00 pm and closes at 5.15 pm the next day, the automatic pivot points calculation does not work. I would like to request your help to modify this code to take into account futures contracts whose session spreads on two days. Thank you in advance for your help Best regards, Chloe TTM DAILY PIVOTS.pla

Hello. I'm having trouble with a study, and I would like some help with it. The premise is simple. Recording today's total volume traded between a specified time range and comparing it with the same previous day traded volume during the same specified time range. So far so good. The formula below does just that. The thing is, I want today's reading to indicate the difference of traded volume when compared to yesterday's traded volume at that same time. So, if today, at 10:05 AM, the ES has already traded 115.882 futures, what is the difference in %, when compared to yesterday's same time? I can say that this Friday, at 10:05 AM we had traded 129% more volume than the previous day at that same time. Simply said, I want to know in realtime the trade volume difference when compared to yesterday's traded volume? How can I program and insert that in the formula below? Thank you. Regards, Fernando PS: I use Multicharts. Inputs: startTime (930), endTime (1200); variables: stTime (false), resetVol (false), sessVol (0), myVolume (0), prevVolume (0), todayVolume (0); if BarType >= 2 then MyVolume = Volume else MyVolume = Ticks; if date <> date[1] then begin resetVol = false; if time > startTime and resetVol = false then begin resetVol = true; prevVolume = todayVolume; todayVolume = 0; end; end; if time > startTime and time < endTime then begin todayVolume = todayVolume + myVolume; end; plot1(todayVolume); plot2(prevVolume);

Oldies, why do you act so rude towards people who ask simple questions? You treat people like they are ignorant. You too, were ignorant when you started. Courtesy goes a long way to make a Forum a fun, safe, interesting place to spend your time learning. But not with all these ?!? ! RUDE REPLYS!

I don't know where to post this so i thought here would be fine. Price hit resistance at 77.5, is rejected and supply significantly overwhelms demand and drives price down to 81.25 (a short-term support level that i did not have marked). 81.25 is rejected and the test is unable to make it to the low on low volume, indicating the supply required is not coming in. I took this trade and was stopped out around 88. I did not have as sound a reason for taking this trade as i have outlined here, but i had an idea that price was rejected at 81.25 and the test was a weak one.

hi guys, does anyone have any info where i can find some help on this subject ? i saw some stuff and i want to find more. mostly i trade forex, but i want to trade futures too. mostly day trading because of the levarage etc, and my account is not so big, (YET!!!).

Volume Weighed Color Bars If you subscribe to the school of thought that Volume is a Leading Indicator of Price... this indicator is for you. The price bar will widen when the volume is higher than previous bar, and narrow when less than previous bar. Volume_Weighed_Color_Bars_beta01.txt

Shifted There is a school of thought that today's price action is just a continuation of yesterday's. ...and that if you shift today's price bars so that today's opening price matches with yesterday's close, you will see a continuation of yesterday's price action. This indicator does just that: it will shift today's price bars by the open/close difference. Note: this chart is for price action reference only. Please don't trade with this chart or you might get a very disappointing fill. It is recommended that you cover up the price scale when you read this chart. Shifted.txt Shifted_(MultiCharts).pla

This is an interesting indicator created by Walterw. The Volume Delta plots the number up volume (green) and number of down volume (red) with the larger of the two always on top. This is a very useful visual tool to judge buyers vs sellers per bar. All credits go out to Walterw for the TICK Delta. Also check out the oscillator version of this indicator. Screenshots are attached. VOLUME DELTA.ELD

The Basics of Volume Part 1 by Martin Pring Most all the indicators used in technical analysis are based on pricing data. We either use prices themselves, a statistical manipulation with moving averages, or oscillators, etc. Volume, though, is an independent variable and can therefore be extremely useful in confirming price action. There are lots of ways of using volume, such as the construction of oscillators, on balance volume lines, and the design of indicators using both volume and price. Some of these more sophisticated variations will be discussed in future articles. In this one, though, I am going to concentrate on the basics. First, it is important to understand there is always a perfect balance between buyers and sellers because the amount of a security sold is always identical to that which is purchased. What moves pieces is the relative enthusiasm of buyers or sellers. If sellers are more motivated than buyers the price will decline and vice versa. Volume is usually displayed in charts as a series of histograms underneath the price. This is a useful form of presentation since it reflects expansions and contractions in activity. There are several key principles used in interpreting volume. However, before I cover this aspect, it is important to understand that when I talk about changes in the level of volume I am referring to volume changes relative to the recent past. For example, it's not possible to compare the volume on the NYSE today when it's in the hundreds of millions with the volume at the start of the century when it was less than one million. This is because there are now far more shares listed. Activity has also grown because of futures and options arbitrage, and reduced commission charges allow more frequent trading. But you can compare high volume this week with volume two weeks ago. The following represents a brief synopsis of some of the basic principles of volume interpretation: 1. Volume should go with the trend When prices are rising it is normal for volume to expand, and when prices are declining volume typically contracts as in Figure 1. Figure 2 reveals that when we talk of rising or contracting volume, we mean the overall trendof volume, not individual sessions. The green arrows mark the trend, which is an expanding one. Within that trend, though, there are individual sessions, such the two flagged by the red arrows, where volume is below the surrounding days. When prices are rising and volume is expanding market action is not telling us much, except to say that this is a normal state of affairs and that the up trend is soundly based. However, when prices rise, as in Chart 1, featuring the Mexico Fund, and the trend of volume is down, it is abnormal and warns us that rising prices are being fueled more by a lack of selling than the enthusiasm of new and aggressive buyers. Most of the time you will find bear market rallies being associated with a trend of declining volume, such as that shown in Figure 3, where volume contracts as the short-term bear market rally develops. Just as falling volume and rising prices are abnormal, so are declining prices and expanding volume. In a healthy market, prices and volume contract together, more because of a lack of buying than a preponderance of selling. However, when prices decline and volume expands, it tells us that downside pressure is present because sellers are very aggressive and this is not a good portent for future prices. In this regard, Chart 2 featuring Nucor, shows how volume starts to pick up as the price starts to decline. This is a very subtle sign, but a very important one nonetheless because it tells us that sellers are getting anxious. Since prices are declining it also informs us that buyers are not enthusiastic enough to pick up the slack. Quite often you will see the situation where, following a rally, prices start to slip. However, on the first or second day that this starts to happen, volume picks up noticeably. This is abnormal and again flags a danger signal since it indicates that prices are falling due to the urgency of sellers rather than falling of their own weight due to a lack of buyers. 2. Volume leads price during rallies It is normal for a peak in prices to be preceded by a peak in volume. In Figure 4 you can see that the volume peaks at A but the price tops out at C. The level of volume at C is less than that at A and B. At point B, a negative divergence between price and volume developed as prices moved higher and the peak in volume moved lower. This type of action tells us that prices are no longer being supported by an influx of enthusiastic buyers and that the prevailing trend is suspect. Chart 3 of IBM, displays two interpretive principles. First, we see the concept of volume leading price. Secondly, note how volume expands noticeably on the first two days of the decline. This, as discussed above, is abnormal because volume is not going with the trend, and is therefore a bearish sign. Article printed with permission. For more information on Martin Pring please visit Pring Research - Technical Analysis, Educational CDs, Financial Newsletters and Charting Tools.

Here's a great chart from today! Many killer moves in ER2, almost all of them just perfection. The total made by the moves was : 96 ticks available following Market Profile and the breakdown of bid/ask. Not too shabby!! 802.4-805 for the first long 803-805 for second move 803 to 805 for 3rd 802.6-799.6 for the 4th move