Open and Free Discussion on Volume

[Kiwi 16]

One example only proves that one can find one example.

 

Sadly this is something that many beginners and not so new traders fall into, in some cases repeatedly.

 

The statement was that "volume leads price. always."

 

And one example simply demonstrated that "volume led price. this once."

 

 

Quite a number of studies have been done in this area and they do not support the view that volume leads price always; in fact they call into question the more moderate view that volume leads price most of the time.

 

 

To quote from one of the many such:

 

"Lead-lag relationships were found in about 15% of the usable data sets. Price variability leads volume slightly more frequently than volume leads price variability. Hence, a small number of lead-lag relationships do exist between price variability and volume, and the results are invariant with respect to the price variability measure or volume measure employed. The number of times volume leads price variability and vice-versa are nearly identical."

 

More information is available for ones education, should one really feel the desperate need at:

 

ScienceDirect - Search Results: Lead-lag relationships between trading volume price New evidence

[Spydertrader 10]

  bathrobe said:

You are entitled to your opinion, I see it both ways.

 

I haven't posted an opinion. I have described how all markets operate.

 

  thalestrader said:

You reply to all posts except those asking you to demonstrate how you have come to such a conclusion.

 

When asked to provide additional information, I have done so - in this and in other threads (both here and on ET). If you review your own posts, you'll see that you did not request additional information, you demanded I 'prove it.'

 

Been there. Done that. Own the T-Shirt.

 

If proof is what you desire, I'm confident someone can point you in the right direction.

 

I have no problem pointing people in the right direction whereby someone interested in trading can learn, or to provide additional clarification as necessary. However, I have no desire to debate the validity of the statements made, nor do I see any benefit to doing so. It's a very simple process, really. Either, I am full of shit or I am not. Either Volume works as I described, or it doesn't.

 

If you believe I represent the former, well then, placing me on ignore represents an efficient decision, and costs you nothing.

 

Understand, I'm not asking for people to believe. I've merely suggested some might wish to go take a look at that which so many believe cannot exist.

 

- Spydertrader

[Kiwi 16]

  Spydertrader said:

I haven't posted an opinion. I have described how all markets operate.

 

Opinion: a belief or judgment that rests on grounds insufficient to produce complete certainty.

 

 

How is your absolute statement on this page anything but an unsubstantiated opinion. I refer in particular to the confident assertion: "Volume leads Price. Always."

[Spydertrader 10]

  Kiwi said:

Opinion: a belief or judgment that rests on grounds insufficient to produce complete certainty.

 

 

How is your absolute statement on this page anything but an unsubstantiated opinion. I refer in particular to the confident assertion: "Volume leads Price. Always."

 

It's unsubstantiated to you.

 

The Volume Sequences, to which I have repeatedly referred, signal the end of one trend and the beginning of another. Unless and until Volume completes these sequences, the current trend has not ended, and the next trend has yet to begin. When these Volume Sequences do complete, then (and only then) can one expect to see the end of one trend and the beginning of the next.

 

Hence, Volume leads Price.

 

- Spydertrader

[Kiwi 16]

Another little quote from someone who actually did the work:

 

"We test for Granger-causality between trading volume and price volatility. We modify the standard regression procedure in several ways. We take the first difference of the logarithmic transformation of each series to account for potential nonstationarity in the data. We isolate the time series structure of each series and test for causality using pre-whitened residuals to eliminate problems associated with autocorrelation in the data. Finally we test for causality in both mean and variance to account for the presence of time varying variance (ARCH) in both series. Our results provide strong evidence that price changes lead (cause) volume in the Granger-causality sense. There is no evidence that volume causes volatility."

[Spydertrader 10]

  Kiwi said:

"There is no evidence that volume causes volatility."

 

Attached, please find results which indicate otherwise ....

 

[Kiwi 16]

It is unsubstantiated to anyone lacking a "religious" view of it until someone provides "grounds sufficient to produce complete certainty." Its not about me. Its about the statement you made and have not supported.

 

The table above provides no proof of anything - not even a suggestion of statistical analysis.

 

 

Repeating that quote from someone who actually did the work:

 

"We test for Granger-causality between trading volume and price volatility. We modify the standard regression procedure in several ways. We take the first difference of the logarithmic transformation of each series to account for potential nonstationarity in the data. We isolate the time series structure of each series and test for causality using pre-whitened residuals to eliminate problems associated with autocorrelation in the data. Finally we test for causality in both mean and variance to account for the presence of time varying variance (ARCH) in both series. Our results provide strong evidence that price changes lead (cause) volume in the Granger-causality sense. There is no evidence that volume causes volatility."

 

 

I will leave you with that. If others are satisfied with your statement then fine - it takes all kinds to create a decent market.

[Spydertrader 10]

  Kiwi said:

I will leave you with that. If others are satisfied with your statement then fine - it takes all kinds to create a decent market.

 

Again, you miss the whole point.

 

Nobody should remain 'satisified' with my statement. I encourge people to go take a look for themselves, rather than, rely on what others think, believe, post or do.

 

One of us actually 'did the work' using Excel.

 

One of us quoted the works of others.

 

- Spydertrader

[Kiwi 16]

The statement that Spyder made was: Volume leads Price. Always.

 

Always? Like: every time; never wrong; always??? There is plentiful evidence (see papers and searches quoted) that this is incorrect.

 

An excel table is a collection of (perhaps good) data and isn't evidence that would prove the assertion even in a weak form. It could be a useful test of one working on a strategy but how can it prove that volume always leads price.

 

Then Spyder falls into the trap of claiming that 'his work' is somehow better than 'my research.' Imagine how much stronger the argument might be if one had to do a little physical labour, maybe digging a ditch or even a grave would make the argument stronger?

 

Spyder, you have made a strong assertion and then you attempt to make it look like you are simply encouraging people to look for themselves. Come on. You are beginning to make as much sense as your mentor.

 

This really is one post too many or three or four - I wouldn't be surprised or even disappointed if Brownsfan removed it. Perhaps, recognizing that you believe it to be true and many others don't we can move on to something more interesting.

Edited June 28, 2009 by Kiwi

[Mr_black 10]

Price/Volume relationship is obvious in the trading fractal context boundaries

[Marsupilami 10]

  Mr_black said:

Price/Volume relationship is obvious in the trading fractal context boundaries

 

I think I can see in the chart what you mean by the above quote. It seems to work for you as one can see in your various P&L statements of which I have no reason to doubt its veracity ( that sentence sounds strange, is this correct English, lol ?).

 

I would really love to see someone draw the channels, and more importantly, the rising and declining volume "gaussians" in real time. I wonder how many hundreds of newcomers on ET have drawn those channels, pennants, FTTs etc. and posted their charts at the end of the session and yet failed miserably to actually trade this at the hard right edge.

[thalestrader 14]

  Marsupilami said:

I would really love to see someone draw the channels, and more importantly, the rising and declining volume "gaussians" in real time. I wonder how many hundreds of newcomers on ET have drawn those channels, pennants, FTTs etc. and posted their charts at the end of the session and yet failed miserably to actually trade this at the hard right edge.

 

Bingo!

 

How about Spydie and Blackie come by here this week and post some real time charts with real time analysis that provides:

 

1) Specific entry points and entry method, i.e. specific entry price and whether it is to be executed on a stop, limit, or MIT.

 

2) Placement of inital stop loss

 

3) A real time, before the fact explanation for the basis of the trade.

 

4) Update a trailing stop or otherwise communicate in real time a take profit level.

 

It would likely not be enough ever to convince me that price, rather than volume, is the primary indicator of where a market is going.

 

However, it would then allow a discussion that can debate the merits of their approach. Right now, all that either has provided is after the fact annotated charts and assertions, implied or explicit, that they are correct and profitable.

 

I've posted dozens of trades with charts here at TL in real time with entry, stop loss, and result - in real time, before the entry has triggered. All of these have had a clear explanation and basis. There is no need to learn a secret language or a new vocabulary. Nearly all of those trades have resulted in a profit. The few losses were small relative to the gains.

 

My opinion is that any approach to speculation that is profitable, repeatable, and teachable should be communicable at the hard right edge of the chart.

 

So let's see some real time volume fractal trend sequence completion trading here in real time.

 

I can't wait - James ought to sell tickets to this one!

 

Best Wishes,

 

Thales

[thalestrader 14]

Thank you my Good Tams,

 

However, I have a woefully incomplete understanding as to what I am looking at here.

 

  Tams said:

 

I see price bars from an unidentified market in the top pane.

 

I see a volume histogram in the bottom pane.

 

I do not know what it is I am looking at in the middle pane. Is that a different time frame from the one in the top?

 

You ask if I see the result - well I see things, and I assume you are proposing, presumably, that I should be reaching a cause and effect conclusion. Yet you have not provided a complete picture. Would you please provide to us a screen capture of the whole chart, inlcuding indtrument, price and time scale, etc.

 

Also, as I am not at your level of intelligence, wisdom, and understanding, might we also have a few details as to what it is we are looking at in the above example.

 

Thank you again for your help,

 

Thales

Edited June 28, 2009 by thalestrader
spelling

[Mr_black 10]

I post one sample of P3 trade on Friday chart#1 is the moment when I enter chart#2 is where I am taking profits....My stop was 2 points

[thalestrader 14]

  Spydertrader said:

I haven't posted an opinion. I have described how all markets operate ... If you review your own posts, you'll see that you did not request additional information, you demanded I 'prove it.'

 

Been there. Done that. Own the T-Shirt.

 

If proof is what you desire, I'm confident someone can point you in the right direction.

 

Rather than demonstrate the accuracy of what you assert, you choose instead an ad hominem attack to discredit me by implying I have made an unreasonable demand.

 

All you had to say was that you are unable to prove the assertion. You can always make the claim that it is a priori and not a posteriori knowledge.

 

Then we could debate the existence of a priori knowledge, and the character of opinion.

 

Best Wishes,

 

Thales

[thalestrader 14]

  Mr_black said:

I post one sample of P3 trade on Friday chart#1 is the moment when I enter chart#2 is where I am taking profits....My stop was 2 points

 

 

Thank you for sharing, Mr. Hershey.

 

So, can we count on you posting some of these tradable opportunities throughout this week in real time and before entry has already been made and profits have been taken?

 

Specifically, if volume leads price, the we would love to learn how we can use that information to allow us to anticipate the price move and profit from it like good speculators should.

 

We really need to learn how you enter the market, and how you decide at what price to enter.

 

 

Thank you,

 

Thales

Edited June 28, 2009 by thalestrader

[Tams 20]

  thalestrader said:

Thank you for sharing, Mr. Hershey.

So, can we count on you...

Thales

 

 

That's a sly remark. It is not accepted here.

I am putting you on ignore.

Have a nice day.

[Marsupilami 10]

  Mr_black said:

I post one sample of P3 trade on Friday chart#1 is the moment when I enter chart#2 is where I am taking profits....My stop was 2 points

 

Ok, what made you so sure at your entry that point 3 was in ? The low volume ? Or was it "intuition" ? Regardless of the debate whether volume actually leads price or not, I find it incredibly hard to determine whether a Gaussian has been completed.

 

Again, I find your results on the P&L thread impressive, if you can make money with this, more power to you !!

[thalestrader 14]

  Tams said:

That's a sly remark. It is not accepted here.

I am putting you on ignore.

Have a nice day.

 

I'll leave it to others to judge who is and is not sly. I see nothing wrong in any of my posts, most especially the one you single out as being somehow inappropriate.

 

I do wish you well,

 

Thales

[johnjohn1hew 10]

Here is a chart of the YM.

[johnjohn1hew 10]

This is me trying to get this thread back on track for the volume curious.

 

  rcossey73 said:

This is exactly where I get lost.

1 unit of volume = 1 buyer and 1 seller. Correct?

 

If so how in the world can you attribute gradual rising volume as "more buyers"? You could just as easily claim it is more sellers. It seems to me there is an equal number of sellers and buyers, but maybe not.

 

I often see a 10 point move on the ES with declining volume and then a few minutes later see a 2 point move on rising volume. Not sure how that is possible if rising volume means more buyers.

 

I attribute gradual rising volume with rising price as meaning more buyers (demand). A substantial trend can take place on low volume, this is even an indication of strength. When price rises and so does volume, then you have a gradual acceptance of price by the sellers. More and more sellers are coming into the market (dustribution), possibly indicating a turn is to come.

 

In short, if prices are rising there is more demand than supply. If price are falling there is more supply than demand. The buyers have to search higher for sellers (D>S) and the sellers have to search lower for buyers (S>D).

 

One will need an understanding of market structure in-order to fully grasp this theory. I learned it by studying the DOM ladder.

Edited June 28, 2009 by johnjohn1hew

[Spydertrader 10]

  Kiwi said:

Spyder, you have made a strong assertion and then you attempt to make it look like you are simply encouraging people to look for themselves. Come on. You are beginning to make as much sense as your mentor.

 

We live in a binary choice world.

 

Volume leads Price - Always represents a true and accurate statement, or it doesn't.

 

I've made a strong assertion (your words) which appears to directly contradict what you know to be true. In addition, my strong assertion appears to directly contradict both conventional wisdom and available scientific data.

 

As such, one can arrive at a simple binary choice. Either, I have no idea what the hell I'm talking about, or maybe (just maybe), I've described something of value.

 

As such, I encourage everyone to go and look for themselves because ultimately, the responsability for decision-making rests on the shoulders of the individual trader, and not with me.

 

If there is an interest (and to avoid taking this thred too far off topic), perhaps, I'll start a thread this week containing the specific instructions required to learn to see the sequences about which I have repeatedly spoken. For those less patient, a Google search should provide enough information to get one started.

 

- Spydertrader

[JBWTrader 10]

I am a little ignorant on Volume, but I understand price movement pretty well.

 

I actually believe that price movement and why it goes where it goes has very, very precise reasons. In fact the better funded algos/bot's know well ahead of time where price is going next and why....

 

the rate of change of this movement I do not understand except that price is tracking itself along several fractal ratios and hence when a certain fractal is lagging behind in time and or position , Price will accelerate to catch it up. Same in reverse when one or more fratal ratios are behind in time/position.

 

Now given The majors know where Price is going it will use volume to get there ie to overcome obstacles, to acclerate Price or deaccelerate price even to within one tick of where they want to take it.

 

Even though there are fractals of price in clear visual ratios it(not so clear when first looking as one has to find the common "pattern repeated across all frames of reference) makes to think that there must be these ratios also present in Volume (as Spydertrader alluded me to).

 

Bear with me re this thinking..I am investigating this so it is raw... If Price knows where it is going next and hence why then it needs fuel to get there. The fuel is volume...the rate of change of Price is linked somewhat to Volume how much volume is needed per unit of Price seems to vary and not always in a linear way (and visa versa ie a unit of volume can vary with Price).

 

Now as I understand it to using perhaps a poor analogy , when a car (Price) has a plan of where it wants to go from A to B it needs gas (Volume). There are times when the car (Algo driver (s)) need it to go faster and/or slower and this is a function of quite a few things eg Road conditon and obstacles, tyres and traction, and power all could be explained in terms of buying and selling pressure and the short to medium goals of Price ie intention.

 

Hence Price is linked to Volume and volume to Price. At this stage in my learning I would say that it doesnt matter which leads which...its like another analogy...A gun with bullets...the gun is price and the bullets are volume...the gun has a person who knows where to aim Price and has only so many bullets to fire...on the other side of the fence is another person with a gun who is firing back. Who is going to win..? one could say the one with the most bullets...however one could argue that its not the number of bullets but the number of shooters/guns on either side that have the same intentions that will win the short term war...this I guess plays over and over again in the markets...

 

Deriving Price volume relationships that are clear and can be used for trading I have only seen from Urmablume's work and Db's. I know they would argue that Volume and its marks are very important to study.

 

One can make money from Price alone and from volume alone. I have personally found that the rate of price change to the rate of change of volume is defintely not linear and hence more complex types of relationships exist between the two. How much gas or bullets get used to achieve ones goal matters only to the bigger players IMHO. The smaller guys have to pick a side and hangon by wheelsucking the best we can...

 

Again this was more an exploratory post. Nothing should be taken as concrete or valid. These are my thoughts thus far on Price and Volume...

 

I guess I have said Price alone has an intention but can volume ? This is what I am thinking about now...I guess its the algos that have the intentions and volume and Price are the outcomes of these intentions....Ill keep thinking on this...Thanks for the discussion.

 

All the Best

John

[johnjohn1hew 10]

  Quote

I actually believe that price movement and why it goes where it goes has very, very precise reasons. In fact the better funded algos/bot's know well ahead of time where price is going next and why....

 

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.

[Tams 20]

  johnjohn1hew said:

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.

 

 

http://www.traderslaboratory.com/forums/f30/can-price-move-without-volume-6179.html#post69453

  johnjohn1hew said:

Price can only rise when demand is greater than supply. And in your case demand is greater than supply as the sellers realize that prices are too cheap and so they withdraw and wait for higher prices. If the buyers share this sense, then price will rise as they try to find sellers. Also, we can only call the demand present at any given moment "true" as we have no way of knowing the targets of the sellers (if they even have targets) until we reach them. Hopefully this makes sense.

 

 

See any correlations between the posts?

 

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

 

 

 

p.s. I am merely pointing out the observation, I am not endorsing/disagreeing the truth, value, or completeness of your observation.

Edited June 28, 2009 by Tams