Volume: ARCHIVE

[firewalker 10]

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

 

Not sure where to post this exactly, but as it's volume related the Wyckoff Forums is a good place to do that... although perhaps a new thread no volume should be initiated? Anyway, moderators are free to move this post if they feel it's more approriate elsewhere.

 

Found this interesting article refering to the "crap volume" that has been mentioned several times in 'Riding the Wyckoff wave' thread.

 

"Typical daily volume at the New York Stock Exchange has fallen to between 1.1 billion and 1.2 billion shares a day from around 1.5 billion shares in mid-March.

 

Marc Pado, a Cantor Fitzgerald U.S. market strategist, said the past two months' levels are typical of summer holidays starting "pretty much after the kids get out of school." [-> ehm, right ]

 

"On Nasdaq, volume has slumped in the last two months to around 800 million shares a day, after running close to an average last year of 1.4 billion shares.

Trading in previous years has not dropped off until after Memorial Day, the unofficial kickoff of the U.S. summer holiday season.

 

This year, NYSE volume has held below its 200-day moving average of about 1.53 billion shares since April 2, the longest such below-par streak in at least 13 years. At the Nasdaq, prime exchange volume has been below its moving average since March 24, the longest such streak in 16 months.

 

Full article here: http://www.guardian.co.uk/business/feedarticle/7531703

Edited June 8, 2012 by DbPhoenix
Link added

[DbPhoenix 42]

Not sure where to post this exactly, but as it's volume related the Wyckoff Forums is a good place to do that... although perhaps a new thread no volume should be initiated? Anyway, moderators are free to move this post if they feel it's more approriate elsewhere.

 

That's us. And it doesn't seem inappropriate. But what point are you making? Are you asking about the relationship between volume and trend?

[firewalker 10]

That's us. And it doesn't seem inappropriate. But what point are you making? Are you asking about the relationship between volume and trend?

 

I'm not trying to make a point or anything. I'm sure we've all observed the volume as such... I just found the article interesting because it gives more perspective to the volume, once you compare with history.

 

I might as well throw a question in the air then... how does one know the volume signals a lack of participation from the buyers or signals a situation where price rises because most of the supply has been removed?

 

Another Q: The person from the article mentioned "summer volume"... how do we interpret volume from different time periods? Most of us will be wary of lunch time because the lack of any decent volume may be nothing more than an illustration that the big boys are having their break... But what about the impact of seasons and what about comparing volume from year to year? Volume now is on a whole different scale than, say, 20 or 50 years ago...

[DbPhoenix 42]

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.

 

Note that it's important to place this within the context of what's being traded. If one is "trading" a largecap fund favorite over the longer term, the volume differences may be so minute as to be almost undetectable. And yet the stock moves. At a snail's pace, maybe, but it moves. But an intraday trade of something illiquid will provide a different picture. Then there are futures. And forex. And ETFs.

 

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.

Edited October 27, 2009 by DbPhoenix

[Tannism 10]

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 am rereading and rereading Neil. He encourages translating trading volume into $$ as insightful. While this is not natural for me, it may be like learning blending candlesticks, with enough practice, the eye automatically blends. I have been asking myself, why go through the effort of learning how?

 

Understanding his concept may relate to 'behavior' ...when traders are actually putting the money into or the taking money out of the trade.

[DbPhoenix 42]

I am rereading and rereading Neil. He encourages translating trading volume into $$ as insightful. While this is not natural for me, it may be like learning blending candlesticks, with enough practice, the eye automatically blends. I have been asking myself, why go through the effort of learning how?

 

Understanding his concept may relate to 'behavior' ...when traders are actually putting the money into or the taking money out of the trade.

 

Viewing volume this way ought to help the trader to avoid looking at it as an indicator. And I suppose that one could argue that this is what Market Profile does, or my boxes: relating volume to price in a way other than "bars".

[gassah 10]

http://tradingsuccess.com/blog/es-05-23-2008-374.html

 

Barros making swing volume comparisons within trends.

[gassah 10]

I've tried to simply Ray's chart by staying within the defined 5d swings.

[firewalker 10]

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.

 

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?

Edited October 27, 2009 by DbPhoenix

[DbPhoenix 42]

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 10]

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 10]

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

[matinthehat 10]

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.

Edited July 1, 2009 by DbPhoenix
Add VS link

[atto 20]

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 10]

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 42]

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.

Edited January 15, 2009 by DbPhoenix

[matinthehat 10]

Here is a chart of a downward movement of the YM. I have put my interpretation of it below. Please point out my errors. Thanks.

 

1. End-to-end down bar with very high activity = selling climax

 

2. Then a rise on lighter and dying volume = indicating lack of selling pressure

 

3. The high of the movement is on very low volume and is not able to reach the previous movement’s high nor the opening high

 

4. Then a decline on higher volume

 

5. The movement makes new lows on low volume and pushes passed the previous movement’s low = indicating that selling pressure has been exhausted

 

6. The lowest bar is followed by a indecision bar on lower volume than the low - this bar closes above the low - indicating that there are sellers and buyers, but not enough of either to push or pull

 

7. Then there is a rise with low volume - buying power is greater than the selling power as near the end of the move there is substantially higher volume with little price movement = indicating buyers and sellers seeking equilibrium

 

8. The next big up bar is on higher volume that saw selling pressure, but the buying pressure was greater

 

9. The top is on light volume and the buyers are not able to make new highs = indicating lack of demand

 

10. Then a decline follows on light volume - indicating buying pressure has been exhausted

 

11. The decline is broken by a rise with rising volume ending with extremely high volume and little price advance - the price does not really get close to resistance = indicating buying exhaustion

 

12. The price then declines on light volume = exhaustion of buying pressure - this move has a hammer with higher volume, but the hammer is a bearish one and the sellers overpowered the buyers

 

13. Price then approaches support on light volume and is not able to break through = indicating lack of selling pressure

 

14. Price then rises on light volume with one bar on high volume and then just stalls at the top on light volume = indicating equilibrium has been met - this move fails to make it to resistance, possibly meaning that there is now new resistance

 

15. The downward movement is then met by increasing volume and price breaks through support and then halts on its way down on low/dying volume and continues from there

[DbPhoenix 42]

Here is a chart of a downward movement of the YM. I have put my interpretation of it below. Please point out my errors. Thanks.

 

You clearly put in a great deal of work on this, and I acknowledge the effort. But before we get into "errors", do me a favor. Create the same chart using a line for price rather than bars. Also, if you can, plot a 1-period MA of volume in the volume window. Then post the chart here.

[learner 10]

Hi Db,

 

Here is the chart with line and vol + 2 MA (I cannot able to plot 1 MA). What are things I want to see in the below chart.

[matinthehat 10]

Here it is:

 

 

I probably should stick with line charts until i completely understand IT. When i have bar charts up it makes "reading the volume and price action" seem kind of intimidating. But when i have this simple style up it doesn't look so scary.

Edited January 18, 2009 by matinthehat

[DbPhoenix 42]

Here it is:

 

 

 

I probably should stick with line charts until i completely understand IT. When i have bar charts up it makes "reading the volume and price action" seem kind of intimidating. But when i have this simple style up it doesn't look so scary.

 

I darkened your volume line a bit to make it easier to see. Before we go back to your bar chart, tell me what you see here:

 

[matinthehat 10]

Hopefully this is good:

 

 

1. New low with high volume = selling climax

2. Rise with light volume = selling pressure exhausted

3. Top with low volume = not enough demand

4. Lighter volume on decline = buying pressure seems to be exhausted

5. New low for the day with lighter volume = lack of supply

6. Rise with low/stable volume = selling pressure exhausted

7. Top with light volume = lack of demand

8. Decline with light volume = buying pressure exhausted

9. Spike on high volume = buyers came in but selling is still very overpowering

10. Decline on light volume = buying pressure is exhausted

11. Rise on light volume = not much participation on the rise

12. Top is formed with light volume

13. Decline on rising volume = excessive supply in the market

[DbPhoenix 42]

Hopefully this is good:

 

 

 

1. New low with high volume = selling climax

2. Rise with light volume = selling pressure exhausted

3. Top with low volume = not enough demand

4. Lighter volume on decline = buying pressure seems to be exhausted

5. New low for the day with lighter volume = lack of supply

6. Rise with low/stable volume = selling pressure exhausted

7. Top with light volume = lack of demand

8. Decline with light volume = buying pressure exhausted

9. Spike on high volume = buyers came in but selling is still very overpowering

10. Decline on light volume = buying pressure is exhausted

11. Rise on light volume = not much participation on the rise

12. Top is formed with light volume

13. Decline on rising volume = excessive supply in the market

 

It's very good. And I hope that the transition hasn't caused any motion sickness. But viewing price and volume in terms of movement rather than bars takes some adjusting, and patience is in order.

 

I suggest you begin by trying to avoid yes/no, on/off, stop/go words like "climax", "exhausted", "lack". A climax, for example, is quite an event, and doesn't come along very often. Save it. As for exhaustion and lack, if that were the case, trading would come to a halt. Though these words may be bandied about by people who ought to know better (including me), they encourage a certain type of perception that will not serve the Wyckoff trader well. Better to think of balancing and a never-ending pushmepullyou.

 

1. Falling price and rising volume. Both buyers and sellers are heavily into the market, but sellers have the upper hand. Buyers, though, are showing their support (rising volume).

 

2. Selling pressure is being withdrawn. This can be seen by (a) volume declining and (b) price rising. If the battle between buyers and sellers were continuing at a high level and buyers had the upper hand, price would still rise, but volume would be higher.

 

3. Correct. Not enough demand. Not even enough to overcome what minimal selling pressure there is, much less make a higher high.

 

4. Sellers see that buyers don't have it and they begin to push harder. Volume starts out light and price declines, but buyers begin to re-exert themselves and volume increases. Sellers, however, have greater strength, and price continues to decline to a lower low.

 

5. Sellers again withdraw, though volume is much lighter than it was during the last swing low. Since volume is less, and price is lower, sellers aren't having to work as hard to move price down.

 

6. Price rises on lower volume. Buyers have the upper hand again, and sellers are backing off. They may be laying a trap, or they may truly be "exhausted" (the latter is possible, but not likely, given price's progress). But neither really matters. Price is rising. Who cares why? It is important to note, however, that volume peaks before price does, so buyers had a little momentum going here, enough to at least test that last swing high.

 

7. But, when push came to shove, they ran out of gas, and the balance shifted back to the side of sellng pressure.

 

Get the idea? Want to try the rest? And don't abandon your S/R lines. They are just as pertinent to a line chart as they are to a bar chart.

[matinthehat 10]

Ya, i really do need to stop using those words. In hindsight i look a f*ing idiot. Thanks for the new vocabulary and perspective. I'll give the end bit a try.

[DbPhoenix 42]

Ya, i really do need to stop using those words. In hindsight i look a f*ing idiot.

 

Not at all. You look like somebody who's not afraid to tackle something new. That's more than I can say for a great many of the traders I come into contact with. Give it time, and don't be so hard on yourself.