The Price / Volume Relationship

[SK0 10]

  islandboyz said:

I think you make an extremely interesting point. Since I am new to PV trading and the JH method I am hopeful that someone with more experience will respond to your post.

The key points in this thread are volume leads price and the nesting relationship of price and volume. There is NO may-be-this-may-be-that or sometimes-this-sometimes-that in the picture.

[gucci 10]

  BillyRay said:

For instance, the ES (Emini S&P 500)--when the S&P 500 Cash Index is increasing in price, the ES will follow, regardless of the volume. .

 

There is a flaw in your logic. I do not know any instrument that can move without volume. You can not print a price unless there is a transaction supporting it. And if you are vigilant and skillfull enough, you will see the signals that will tell you where the instrument is heading.

[Tams 20]

  BillyRay said:

Great post. I am a 25 year student of volume and range analysis and I would urge that all volume is not created equal. In other words, volume seems to have some analytical or predictive value only when the volume correlates to an instrument that is not dependent on the price movement of another instrument. For instance, the ES (Emini S&P 500)--when the S&P 500 Cash Index is increasing in price, the ES will follow, regardless of the volume. A multitude of program traders assure the price of the two instruments stay within fair market value of one another. But this cannot mean that the ES volume holds predictive value for the cash index it follows. With that said, it can reasonably be argued that the ES influences the cash market prior to the cash market opening. But that influence is shortly lived. In the end, and as the old saying goes, cash is king.

 

there are many PhD thesis and academic research papers on this subject.

you can find the documents in many universities' websites.

[gucci 10]

  Tams said:

there are many PhD thesis and academic research papers on this subject.

you can find the documents in many universities' websites.

 

The money still can stink especially when you wipe your ... with it. Just a joke

[amisme 10]

If I understand right, what he is describing is the basis for the str/sq tool that is discussed in the ET threads, yes? Tracking the difference between the futures contract and the underlying commodity to better identify small trend changes.

 

Other than that he is definitely talking about price and volume, but not in the way that the thread is about.

[Corey 10]

  amisme said:

If I understand right, what he is describing is the basis for the str/sq tool that is discussed in the ET threads, yes? Tracking the difference between the futures contract and the underlying commodity to better identify small trend changes.

 

Other than that he is definitely talking about price and volume, but not in the way that the thread is about.

 

kinda but str/sq applies to YM not ES.

[amisme 10]

That is true.

 

To give a more thorough answer to BillyRay and islandboyz, for the purposes of this method, it does not matter in the slightest why someone chooses to trade the ES. A trader trading based off a comparison of the ES and the S&P 500 is no different from a trader trading for any other reason. In other words, all volume is created equal, as far as we are concerned. If BillyRay was to say that in his 25 years, he has found a methodology that would be concerned with this, I would not have a reason to disagree. I'm sure there are many ways to look at volume, with many different results.

[BillyRay 10]

You cannot legitimately analyze the performance of a vehicle being towed behind a truck. Program trading assures the ES price will correspond to fair market value in relation to the Cash index, regardless of the amount of volume required to place it in line. When these automated programs kick in and there exist a shortage of buyers (sellers) to take the other side of the order flow, price will climb (sink) instantly--with minimal warning and minimum volume required to pull the Cash and ES prices within fair market value. Did volume lead price? Which volume, the Cash or the ES? A simple visual comparison of the ES volume to the same period of the Cash volume reflect the distributions resemble one another only rarely. As I said in my original post, all volume is not created equal.

[gucci 10]

  BillyRay said:

You cannot legitimately analyze the performance of a vehicle being towed behind a truck. Program trading assures the ES price will correspond to fair market value in relation to the Cash index, regardless of the amount of volume required to place it in line. When these automated programs kick in and there exist a shortage of buyers (sellers) to take the other side of the order flow, price will climb (sink) instantly--with minimal warning and minimum volume required to pull the Cash and ES prices within fair market value. Did volume lead price? Which volume, the Cash or the ES? A simple visual comparison of the ES volume to the same period of the Cash volume reflect the distributions resemble one another only rarely. As I said in my original post, all volume is not created equal.

 

I guess you do not want any serious discussion, you just want to prove you are right. So be it. Good trading to you.

[kidpwrtrader 10]

Hello everyone! It is a great opportunity to have found this thread to see others who are on this journey at different areas.

 

I have read the equities threads 1 and 2 on elitetrader by Spyder. I was wondering if there are any equities guys here or anywhere else right now whom I can learn along side with. I was ready to start the chartscripts with wealthlab and found that it costs $800 dollars now. Is there another solution during the learning period as I am sim?

 

Also, I live in Tucson, Arizona so it would absolutely be fantastic if anyone here is from these parts and still interested in trading the method at the beginner level.

 

I know that for me the curriculum must be taken as it started out, at the lowest level to earn while you learn.

 

I have obtained videos from Ezzy for many of the camtasias done in Tucson, Arizona so it appears I am good on the resources. Just looking for updates on what the equities guys are currently doing.

 

Thank you very much for your patience everybody. I know there is constantly more stuff to digest so I appreciate you all taking the time to read my post which is not so related to the topic at hand.

 

 

Sincerely,

 

 

 

Kid

[amisme 10]

When I looked at the software thread, there were a few tools in development or that used to work for generating a final universe, but the only working one I know of right now is the tool set for Trade Navigator. I can pm you a link to the thread and the current universe.

[Ezzy 10]

  BillyRay said:

You cannot legitimately analyze the performance of a vehicle being towed behind a truck. Program trading assures the ES price will correspond to fair market value in relation to the Cash index, regardless of the amount of volume required to place it in line. When these automated programs kick in and there exist a shortage of buyers (sellers) to take the other side of the order flow, price will climb (sink) instantly--with minimal warning and minimum volume required to pull the Cash and ES prices within fair market value. Did volume lead price? Which volume, the Cash or the ES? A simple visual comparison of the ES volume to the same period of the Cash volume reflect the distributions resemble one another only rarely. As I said in my original post, all volume is not created equal.

 

Obviously you do not understand how volume is being used here. It works perfectly fine for our purposes. We are not using volume to predict (as mentioned in your original post).

 

I understand where you are coming from and it's well understood that futures moves with the cash. You are not the only one here with 20 plus years of experience in volume and other analysis - running actual back tests. Several times I've personally had other indexes and the cash running alongside the ES in real time. So again I know where you're coming from and held a similar view at one time.

 

Quotes from Jack Hershey:

  Quote

Trading the liquid ES which is a parasite of the cash S&P 500 is in itself a risk minimizer. The ES simply cannot go anywhere. It is subordinated to the S&P cash index averages as a consequence of liquidity.

 

  Quote

I do not care what the market does. My job is to do what the mrket says to do in a market that is a parasite to the cash market.

 

I like knowing two minutes ahead of time what is going to be coming up as the market announces the next several events.

 

With your current line of thinking you'd have to consider the other indexes too - Valueline, Russell's, the rest of the S&P's, etc. Which cash to use? And there are those times where the futures leads the cash - it happens. What about leading markets? A lot of those things don't have a bearing on what we're doing here.

 

If you wish to pursue it further I'd suggest posting to Jack over on ET. He loves debating that sort of thing. That's not what this thread is about.

 

It's surprising there wasn't more mudslinging considering you came into a thread dedicated to a certain methodology and then suggested it wasn't valid because of the data it was based upon.

One last quote:

  Quote

Equities make up the cash indexes and the futures indexes serve the financial industry as insurance.

 

I trade to make money as a parasite of both.

 

I make money on stocks by gleaning prifits from the results of big money imbalancing the value of high quality equities. When high quality stocks are sold off for whatever reasons, their short term undervaluation presents a simple opportunity to make 10%or more in 3 to 4 days.

 

For future indexes, that depend on the cash, I simply have to use timing to make what is offered, long or shot, from a neutral bias.

 

The dependancy of the futures index on the cash index is not an important matter with respect to making money. Timing is what is important. And the other thing that is important is knowing how the futures indexes work.

 

It is unfortunate that futures index trading is largely a zero sum game at any moment in time. So my selfish interests are there and I do always find someone to take my trades.

 

As we see the independent cash index moving, it is incumbant on futures index traders to trade the their dependent market effectively and efficiently. Luckily for retail traders, we can watch the pros and profit from their trading contraints, etc..

 

Heavy scalpers, in particular, have constraints because of the size they chose to use.

 

We get to see how the futures index relates to the cash and, in particular how "control" of price occurs.

 

The view of the timing of what happens is simply a sequence of rapid events unfolding. The futures index I trade lags well behind the cash index and the futures index that I monitor to be able to trade my lagging index. All of this is a very fortunate circumstance for me.

[MKTr 10]

AM for ESH11 (5' ES) on 7 Mar 2011.

 

MK

[MKTr 10]

5' ES for 8 Mar 2011.

 

MK

[gucci 10]

  MKTr said:

5' ES for 8 Mar 2011.

 

MK

 

Your last black ftt should be FTT. And your last FTT should be ftt.

 

HTH.

[NYCMB 10]

  gucci said:

Your last black ftt should be FTT. And your last FTT should be ftt.

 

HTH.

Hi gucci,

 

Thank you for your post pointing out bar 75 is FTT. Could you elaborate why bar 75 is FTT; and, bar 70 is ftt? Do you compare volumes of bar 70 with bar 75? TIA

[gucci 10]

  NYCMB said:

Hi gucci,

 

Thank you for your post pointing out bar 75 is FTT. Could you elaborate why bar 75 is FTT; and, bar 70 is ftt? Do you compare volumes of bar 70 with bar 75? TIA

 

Sure...

 

Look at the bar with the greatest red volume between those two points in time.

 

It doesn't "break" the rtl.

It is a spike bar.

Despite it having a lot of red volume it is a black bar so to speak.

 

Anyway... one should have known this will be so before this bar....

 

How????????....................Suspense..................

 

Look at the bar labeled ftt. Do you really see black dominant volume there? NO!!!!!! What does that mean???? The market didn't complete its sequences. What is the logical consequence???????

 

 

 

HTH.

[gucci 10]

Enjoy the drill. PAY, PAY, PAAAAAAAAAAAAAAY attention to the tapes and volume ...

 

I'am in a good mood...

[MKTr 10]

5'ES for 9 Mar 2011

 

Thanks for the comments Gucci.

 

I am working on point to point trading and my perception of a lot of things is back on the table for review.

 

Does anyone have a good source for trading lateral movement or walls?

 

MK

[gucci 10]

  MKTr said:

5'ES for 9 Mar 2011

 

Thanks for the comments Gucci.

 

I am working on point to point trading and my perception of a lot of things is back on the table for review.

 

Does anyone have a good source for trading lateral movement or walls?

 

MK

 

 

Annotate ALL of the TAPES and think about overlapping. You will find out that some of the tapes arent tapes at all, because they just happened to be in a previous tape.

 

Speaking about nesting of fractals...

 

Every TAPE consists of AT LEAST two bars.

 

Forget about the walls. They are just nice to haves...

[MKTr 10]

Gucci,

 

Thanks for the feedback. I have made the corrections I believe you were referring to. I agree, thety make sense and seem more consistent.

 

Is there anything I missed? Also please look at the stitchs.

 

Note the dashed lines indicate a tape (level 1) made up of subs.

 

Thanks again.

 

MK

[emac 10]

  gucci said:

 

Anyway... one should have known this will be so before this bar....

 

How????????....................Suspense..................

 

Look at the bar labeled ftt. Do you really see black dominant volume there? NO!!!!!! What does that mean???? The market didn't complete its sequences. What is the logical consequence???????

 

 

 

HTH.

 

Hi gucci,

 

If this is referring to bar 70, then I do see a black dominant bar on the volume in ftt occured. Now there was no VE either on that traverse up to indicate a new point 3. Comparing bar 70 and bar 75, I see both showed dominant volume bar. Perhaps my definition or understanding of how a dominant bar should look like (increasing black in the dominant direction of the current sentiment which was black), then I fail to see why bar 70 does not have a dominant volume bar. Can you further point me to where I fail to see the difference ?

 

TQ.

[gucci 10]

  emac said:

Hi gucci,

 

If this is referring to bar 70, then I do see a black dominant bar on the volume in ftt occured. Now there was no VE either on that traverse up to indicate a new point 3. Comparing bar 70 and bar 75, I see both showed dominant volume bar. Perhaps my definition or understanding of how a dominant bar should look like (increasing black in the dominant direction of the current sentiment which was black), then I fail to see why bar 70 does not have a dominant volume bar. Can you further point me to where I fail to see the difference ?

 

TQ.

 

What does it mean to dominate something?

 

You rule right?

 

Now the black volume would have propelled the price higher, had it been dominant. Do you really see such a scenario on the bespoken bar?

 

In other words... If you kick my ass and I don't feel it what does it tell me about your strike power?

[vienna 10]

Where do you guys exit?

 

Let's say you are in an upchannel...you get an FTT, you short... price goes and touches the RTL...now you either get a Breakout or an FBO. In case of Breakout, you should see increasing Red Volume...but within what timeframe? How long do you wait to make up your mind if this is a BO or an FBO?

If the bar that touches the RTL goes through with conviction, it is easy...but I had some instances where price stops exactly there (but you only get increasing black 2 bars later, getting a small loss- had you exited at the RTL, you would have profited a point or two), some where it walks the line, and some where it does either but eventually goes through.

 

Thanks, Vienna

[NYCMB 10]

  gucci said:

Enjoy the drill. PAY, PAY, PAAAAAAAAAAAAAAY attention to the tapes and volume ...

 

I'am in a good mood...

Hi gucci,

 

Bar 10 is OB on increasing volume, bar 7 is IBGS. Do you treat bar 7 as Red bar? TIA