Confusion Re Mind Over Markets - Pls Help!

[taks1990 10]

Hi guys

 

I'm currently reading MOM for the third time, trying to digest as much as possible, and am confused by a point James Dalton raises.

 

High volume represents acceptance of price, and can be found in balancing areas. Conversely, low volume represents rejection by other time frame participants and is more likely in unbalanced, trending markets.

 

My confusion is that although low volume is associated with trending markets, Dalton says that trends have to have increasing/fair/healthy volume to be sustained, so the two principles contradict each other don’t they?

 

Sorry to ask about such a trivial point but it is important for my understanding of the concepts underlying MP.

 

Thanks all

 

Mark

[beyondMP 10]

They do contradict each other if you are looking at them in the same moment of time reference.

 

However, the observation of high volume representing of acceptance is an after the fact observation. Where the increasing of volume during a trend is a real time observation.

[Fedeo 10]

You have to think somehow at 2 different kind of volume : volume on horizontal axis and volume on vertical axis.

"High volume represents acceptance of price, and can be found in balancing areas" this is true on the horizontal axis (so basically when a price has many "letters" and doesn't move too much). Generally in this case the volume on vertical axis is low, and that's why price range.

"..trends have to have increasing/fair/healthy volume to be sustained" this is true on the vertical axis (the classic volume you have on all chart) and is normally associated with low volume on the horizontal axis (as price has the momentum to move and not range) as Dalton says "low volume represents rejection".

 

Hope I managed to explain myself ....

 

Fedeo

[omni2006 11]

High volume represents acceptance of price, and can be found in balancing areas

correct, acceptance of price. a lot of volume will be concentrated within a small range of prices.

 

Conversely, low volume represents rejection by other time frame participants and is more likely in unbalanced, trending markets.

correct, no price or prices really stand out as accepted. here it is the direction, not concentrated prices, that is accepted.

 

My confusion is that although low volume is associated with trending markets, Dalton says that trends have to have increasing/fair/healthy volume to be sustained, so the two principles contradict each other don’t they?

the high volume is within the context of recent sessions, not any particular price level within a single session. when there is strong/healthy volume and a trendy day, you should see volume pretty fairly distributed across the prices. it is unlikely that a significant POC will emerge.

 

Sorry to ask about such a trivial point but it is important for my understanding of the concepts underlying MP.

 

no worries, i think just about everyone here has a desire to advance their own market understanding and help others do the same. traders helping traders

 

hth

 

thanks and take care -

 

omni

[Frank 10]

try to post the context (or page number) and maybe can see more exactly what he is saying but here is first thought..

 

in Markets In Profile, his next book, he goes into the 'inventory positions' of the various timeframes. if the inventory positions are not in balance, say too many shorts relative to 'typical carried inventory' -- then price can auction up just due to lack of sellers (low volume). this happened yesterday actually.

 

always go back to thinking about a brick and mortar 'auction'... except have to adjust thinking to a '2-way auction' --- like there all these participants at the auction that generally hold X or Y or Z levels of inventory. if they are all 'under their normal' (think mutual funds aren't supposed to hold more than 5% cash - say they are all holding 10% cash), then just a lack of selling can get them to start raising their paddles as they try to get cash levels back to 'normal'. they don't want to 'chase' the market higher so they back off as price goes up -- trying to be patient and keeping a lid on volume.

 

dalton also makes the point that lows are often made on low volume -- and that it is the SURGE of buying volume that takes prices back up. that is also in markets in profile. I did a book review here in this thread on the 2nd book. The second book explains a lot of things more clearly --- Mind Over Markets is very poorly written from a literature sense.