Open and Free Discussion on Volume

[johnjohn1hew 10]

Volume leads Price

 

What volume is, is not up to an individual's discretion. Volume is the quantity of contracts (or other vehicles) traded. PERIOD. Volume and price are instantly plotted at the same time as volume can not be plotted without a result in price and price can not be plotted without an appearance in volume. Traders make volume and volume is plotted at the same time price is created. Price is the price at which traders have traded. Price does not lead volume and volume does not lead price. Ideas of movements (which are opinions of the future direction of price) lead volume and price (i.e. traders' actions lead price, which are represented on the chart as volume and price). So one could say volume and price leads volume and price. When Wyckoff (or whoever stated it first) said that volume is the effort and price is the result, he was not pulling this out of his ass, he was stating the obvious. If you submit a market order to buy one contract you are adding 1 unit of volume to the volume bar and one point in price to the chart AT THE EXACT SAME TIME.

 

Wyckoff, Livermore and the other price action (+volume) gurus realized the obvious and traded accordingly.

Edited June 28, 2009 by johnjohn1hew

[Tams 20]

Volume Leads Price?

 

I believe a more correct description of the concept should be:

 

Past Volume Behavior Leads Future Price Behavior

[johnjohn1hew 10]

You are in fact providing a Price Volume Relationship Formula/Behavior !

 

The first person to give me a quantitative formula for doing this will be given a big con-grat-u-*******-lations! You did the impossible.

[Tams 20]

The first person to give me a quantitative formula for doing this will be given a big con-grat-u-*******-lations! You did the impossible.

 

 

if you can describe it, you can quantify it.

 

if you cannot quantify a concept, your concept is either non-scientific, or incomplete.

[johnjohn1hew 10]

if you can describe it, you can quantify it.

 

if you cannot quantify a concept, your concept is either non-scientific, or incomplete.

 

Mr. Tams, quantify it for me. Please, i am dying for this formula. If you say this then you must be saying that Wyckoff's methodology (which we all know works) is incomplete or non-scientific, as he never gave a quantitative way of using his method. His method was based on the underlying forces, of which have nothing to do with formulas and everything to do with mental reasoning.

[Tams 20]

Mr. Tams, quantify it for me. Please, i am dying for this formula. If you say this then you must be saying that Wyckoff's methodology (which we all know works) is incomplete or non-scientific, as he never gave a quantitative way of using his method. His method was based on the underlying forces, of which have nothing to do with formulas and everything to do with mental reasoning.

 

 

You are extrapolating to a branch that is neither my intention, nor the spirit of this thread. I will let you continue in your own expedition.

[JBWTrader 10]

No formula can predict the next movement in price. Price is random and takes reasoning skills to decipher. Skills that cannot be mimicked by a forumla. It is absolutely foolhardy to assume that anyone holds such insight to be able to predict the next movements of a collective human mind 100% of the time.

 

For you and me John we may get close to 30-65% of getting the direction right. For the more sophisticated and well funded Algos/Bots it is a much higher %. I agree with you no one trader will get close to predicting the Price movement. What I am getting at is that there are well funded drivers of the market who dont need to know where price is going but have the power to do so...their traces are found in Volume and price and other data approximations. No one formulae can track these guys as they have access to many at any moment.

 

Best

John

[johnjohn1hew 10]

You are extrapolating to a branch that is neither my intention, nor the spirit of this thread. I will let you continue in your own expedition.

 

A sound theory is a theory that can be defended. If you cannot defend a theory, then you have no place in pushing it. You stated that human reasoning can be formulated, and i want to see this. Otherwise i have to stick with my belief that quantifying human reasoning is impossible. I do not acknowledge those who want to appear smart, i acknowledge those who can be smart and can convince the opposition without feeling offended and just throwing in the towel. In no way will i ever alow a disagreement to become personal.

[thalestrader 14]

i have to stick with my belief that quantifying human reasoning is impossible.

 

I share your opinion.

 

I do not acknowledge those who want to appear smart, i acknowledge those who can be smart and can convince the opposition without feeling offended and just throwing in the towel.

 

People do nonetheless behave in repeatable though of course not always predictable patterns, especially when an agenda is at stake.

 

First they put you on ignore, then they report your posts, and only then do they throw in the towel.

 

An open and free discussion, but apparently some are permitted to be more open and free than others.

[BlowFish 10]

So you have 1 trader who thinks the price is going up and he buys up 1000 contracts. On the other side you have 1000 traders who think the market is going down and they each sell 1 contract. What exactly is that 1000 volume telling me to do?

 

Well this is not trading advice but it is saying enter against the prevailing trend. Particularly if it is an area that you might anticipate a turn (S/R). I have not talked about volume @ bid and volume @ ask or trade intensity (well not in this thread, there are other threads that discuss those metrics). What I presented is simply looking at volume peaks on a fast chart.

[BlowFish 10]

BF - post a few charts if you get chance. I can't even fathom having a 15 sec chart up! lol

 

There are a few earlier in the thread. I have a couple of nice failures from the end of last week, the reason they are nice is because it looked like support had already 'gone'. Been a bit busy last few days.

[BlowFish 10]

Here is a failure despite that it gave a bounce that would have alowed a scratch or small loss depending on how one was to manage it. (even a profitable scalp). The blue line was towards the bottom end of support and had been tested a few time already. It looked like a fail to me (support failing despite the volume peak).

[thalestrader 14]

Here is what I consider to be a very real gap ... others would say that the gap does not exist and you can just imagine it is not there.

 

Here is how I would trade this: Sell stop a tick below first five minute low (902.75), with a stop loss above the high of the first five minutes (or the HOD is price makes a higher high prior to making a lower low).

 

I would be watchful at the blue arrow lines for signs that price was reversing, or to add to the postion on a break.

 

Will it be a profitable trade? I do not know. But I have an entry, I have a stop loss, and I have potential profit targets. Anyone can see these without needing to learn anything terribly esoteric.

 

If the gap does not begin to fill within the first 15 -20 minutes of trading, I anticipate (anticipate, not predict) that it will not fill today, and that price will close in the direction of the gap, and that there is a high liklihood of a trend day down whereby the market opens at or near its high and closes at or near its low.

 

Best Wishes,

 

Thales

[thalestrader 14]

I would be watchful at the blue arrow lines for signs that price was reversing, or to add to the postion on a break.

 

So far trend down is in effect, but price is hanging around that 901 level (first blue arrow). So currently short, but watchful for a reversal. I would trade this by watching for what happens should price bounce as high as 904 (1.25 ponts above entry) and be willing to exit and then re-enter short if warranted. Otherwise, I am holding short.

[thalestrader 14]

So far trend down is in effect, but price is hanging around that 901 level (first blue arrow). So currently short, but watchful for a reversal. I would trade this by watching for what happens should price bounce as high as 904 (1.25 ponts above entry) and be willing to exit and then re-enter short if warranted. Otherwise, I am holding short.

 

With the lower low (albeit only slightly lower), and price having dropped 5.25 points from entry, there is no reason for this to be any worse than a breakeven trade.

 

Someone once said, (and I think it was Victor Sperandeo) that "If you don't bet, you can't win; and if you lose all yours chips, you can't bet."

 

Best Wishes,

 

Thales

[thalestrader 14]

With the lower low (albeit only slightly lower), and price having dropped 5.25 points from entry, there is no reason for this to be any worse than a breakeven trade.

 

Not much progress lately - tapped 897.25 as five minute low twice now, so 5.5 points max from entry. I will take some off at 900.25 and hold the rest with a BE stop

[thalestrader 14]

Not much progress lately - tapped 897.25 as five minute low twice now, so 5.5 points max from entry. I will take some off at 900.25 and hold the rest with a BE stop

 

 

Stop on 1/2 is 900.25, and stop on second 1/2 is 904: This will net .75 points/contract traded less commish if both stops are taken out.

[thalestrader 14]

Stop on 1/2 is 900.25, and stop on second 1/2 is 904: This will net .75 points/contract traded less commish if both stops are taken out.

 

+2.5 points closed on half position

 

stop at -1.25 points on half position

[thalestrader 14]

If the rally attempt fizzles out and we get a retest of the lows, 896.25-896.75 would be an area to wacth for a potenital double bottom. If price goes there, I'd be watching this for clues as to managing my existing short position, and not to try to pick a botom from which to go long.

 

I still anticipate that the gap does not get filled today (though it might) and that the market will close near the price lows of the day (though it might close at its high).

[thalestrader 14]

So this thread will focus (initially at least) on discussing volume and whether or not it is important in your trading work.

 

I think there's 2 simple sides people can take here:

 

1) Volume is important and can play a huge role in their analysis

 

2) Volume is unimportant and/or just another useless indicator

Alright, you probably guessed I am a little biased here, but allow me to explain how I view volume in intraday trading.

 

In a nutshell, volume can be a tricky thing when watching intraday

 

As I have not been showing volume at all, it might be assumed that I would fall under the second option above, along with Brownie. However, I do believe that volume, especially on daily, weekly, and monthly analysis of stock price movements, can be very useful, and provide important information.

 

I have not found it to be useful for intraday day trading.

 

Here is the 5 minute ES with volume. I was hoping that at some point this morning one of the Volumiati would appear and share his or her views on how to trade the ES today based upon volume analysis rather than price action. I'd really rather see and hear the analysis in real time as the action unfolds. Afterall, anyone can mark up a dead chart after the fact and look like a genius.

[thalestrader 14]

If the rally attempt fizzles out and we get a retest of the lows, 896.25-896.75 would be an area to wacth for a potenital double bottom.

 

I am not calling this a double bottom (though it may be), but I do want to point out how price came down into the 896.25-.75 (represented o the chart by the rectangle) and immdeiately found (at least momentary support). In fact, if I needed the money, I could justify taking profits right here (let's call it 897.75). Of course, the fact that that level was drawn on the chart 25 minutes prior to price reaching it would have given anyone more than enough time to have a limit order at 896.75 or 896.50 which would have easily been filled, and a rsting order at 896.25 that had been there for 25 minutes may also have had a shot at getting filled. All this by way of using price to anticipate its immediate future course, and not relying on magical mystical machinations to divine the future.

 

Certainly a stop on the remaining position at 901 is currently warranted. This would result in +2.5 points on 1/2 and +1.75 points on the second half for an average profit of 2 1/8 points/contract traded.

 

Stop loss is now 901.

[thalestrader 14]

If this rally attempt also fizzles, and if price makes a lower low, 895.50-896 (represented by the second smaller rectangle drawn on the attached chart) would be the next minor support area from which another bottom attempt may launch (or not).

 

A decisive break of 895.50 should clear the way to a test of the 3.25 point range betwen 891.25-894.50

[thalestrader 14]

Stop on last 1/2 is 899.25

 

This would result in: +2.5 points on half and +3.25 on 1/2 for an average profit of of 2 5/8 points per contract traded (not including commish).

[thalestrader 14]

Stop on last 1/2 is 899.25

 

This would result in: +2.5 points on half and +3.25 on 1/2 for an average profit of of 2 5/8 points per contract traded (not including commish).

 

 

Price struck within a tick of the 99quarter stop - still short and stop is still 899.25

[thalestrader 14]

Trading is about making decisions as to how and when to bet on where price is going. All you need to make those decisions is right here on the chart. In other words, let price, the very thing about which you are betting, tell you what you should do.