The Price / Volume Relationship

[rs5 10]

Friday 12 February 2010

[ramora 10]

In an email to Spyder I said I was having a very good month and he suggested I post to TL some thoughts...

 

For what it is worth...

 

I have a printout on my desk that is a condensed paraphrase of some of what I believe to be core concepts of Price/Volume trading. After reading thousands of posts on the subject the most helpful ideas are:

 

"At some point a trader can recognise how to enter on the right trend line and exit on the left trend line. He may also see when trends begin and end at some point. Turns do not occur on ends of bars; they occur intrabar on a volume shift. This is neither on the right or left trend line."

 

Other things that are helping include:

 

1. Wait for the container to complete. Even small containers should have identifiable 1-2-3.

 

2. Look for pt 2's that are outside the previous tape/channel and then wait for an increase in volume in the opposite direction.

 

3. Trade the volume; not the price. Dry up volume is easier to spot for me than increasing volume. Dry up volume after a pt2 is a gift; anticipate an increase in volume in the opposite direction of the last tape/channel. Don Bright has a saying, "If it is repeatable; it is beatable." A pt2 followed by dryup volume and then an increase in volume in the opposite direction is repeatable.

 

4. Ask 'what comes next'. Most of the time there are 2 choices. Some times, like dryup volume after a pt2, 1 alternative has much lower risk than the other.

 

5. I am focusing on 'end points'. What is price/volume doing at the LTR and RTL? In an online seminar a few years ago on Market Profile the host said "I do not want to trade in someone else's auction". He meant that he had a strategy and did not want to trade outside that strategy. With Price/Volume I want to trade at the RTL. I do not want to trade at the LTL as it is too tempting to 'chase price' and probably overbought or oversold. Also, I should already be in a trade at the LTL if volume has been increasing so LTL entries are late and high risk. My focus is RTL trades, everything else is 'someone else's auction'.

 

6. I am watching for dry up volume when I am in a trade and will exit in a second if volume disappears. Dry up volume is my test for a 'wash trade'.

 

Good trading!

ramora

[MKTr 10]

Thanks for all the posts and great discussion. Some of the sidebar items have been quite valuable, too.

 

Here is my 5 minute ES work for Friday 12 Feb 2010 and my view of the daily data.

 

MK

[romanus 10]

 

6. I am watching for dry up volume when I am in a trade and will exit in a second if volume disappears. Dry up volume is my test for a 'wash trade'.

 

Thank you for your post and congratulations on a good month. I have been pursuing my inquiry into the thought process behind the wash trades on and off for quite a long time now in the attempt to minimize the damage from the wrong action following the incorrect monitoring. If you'd be so kind to share some examples where the DU volume caused to exit -- I would tremendously appreciate it. Thank you.

[Ezzy 10]

2. Look for pt 2's that are outside the previous tape/channel and then wait for an increase in volume in the opposite direction.

 

It sounds like you are trading the pt2 to pt3 swing. It that what you were referring to?

[ramora 10]

It sounds like you are trading the pt2 to pt3 swing. It that what you were referring to?

Yes, for a direction change from a short to a long R2R2R2B

[ramora 10]

I have been pursuing my inquiry into the thought process behind the wash trades. If you'd be so kind to share some examples where the DU volume caused to exit .

The decision will not show up in a screen shot of the bar chart. I am looking at Time&Sales, DepthOfMarket, and ProRataVol. I want to see Time&Sales happy ticking off trades with sizes > 2, DepthOfMarket with pending orders above and below the last trade, and ProRata Vol growing. If everything gets slow or stops I get out. Once I am in a trade, my attention is drawn away from bars to volume related tools until I move my stop to BE and asking how far to the left trend line and how long to I stay in this trade.

 

Good Trading!

[ptunic 10]

From #1285 (snipets attached for the 2 laterals under discussion, 09:40 and 12:50 on 01/25/2010):

 

The Lateral to which you refer did form in the dominant direction (Bar 1 of the Sym), it did form on decreasing Volume (again, bar 1 of the Sym and the black bar which formed an equal high with the Sym Bar 1 ) and it did form by a third bar creating an 'upper boundary' with Bar 1 of the Sym. However, these are not the only things known at the time. With respect to Order of Events you had a completed sequence (across a non-dominant segment of a larger trend). Context also played a role (although not important in this specific example. As a result of these three things, Price had to exit through the lower part of the specific lateral in question.

 

The day's second example (beginning at 12:50) formed in the same fashion (with subtle Volume differences), but the Order of Events was different (again context played next to no role in this specific example as well). As such, the outcome was different.

 

I'm trying to isolate the Order of Events difference(s) here. I believe in the second lateral (@ 12:50), it is similar in that you also had a completed sequence. However, the big difference was in the 1st lateral, the completed sequence was in the non-dominant direction of larger trend. While in the second lateral (@ 12:50), the sequences have just completed but as part of dominant movement of the larger trend.

[rs5 10]

Tuesday 16 February 2010

[Spydertrader 10]

However, the big difference was in the 1st lateral, the completed sequence was in the non-dominant direction of larger trend. While in the second lateral (@ 12:50), the sequences have just completed but as part of dominant movement of the larger trend.

 

A subtle (or maybe, not so subtle) difference for sure.

 

Tuesday 16 February 2010

 

Keep up the great work. You are not that far away from the finish line.

 

- Spydertrader

[ptunic 10]

Tuesday, February 16, 2010.

[NYCMB 10]

Tuesday 16 February 2010

 

Hi rs5,

 

What does NSW ( NSVV ?) stand for? TIA

[ptunic 10]

Wednesday, Feb 17, 2010 (in progress)

[ptunic 10]

Wednesday, Feb 17, 2010 (in progress)

[ptunic 10]

Wednesday, Feb 17, 2010 (in progress)

[Spydertrader 10]

What does NSW ( NSVV ?) stand for?

 

Non-Stationary Window.

 

HTH.

 

- Spydertrader

[romanus 10]

#1188

 

....

For many months, I have attempted to impress upon everyone the significant importance of learning the process of differentiation - to learn how to learn to see the differences between that which actually exists, and that which people might simply believe exists. Developing a fully differentiated mind allows a trader to see the market from a standpoint of certainty. In other words, monitoring the market involves much more than placing lines on a chart. One must know why a certain line (or a line of a certain weight) exists at a certain point in time on a chart.

 

If you'd be so kind to comment on when the certainty occurs.

 

In the attached there are two b2b2r2b sequences, one on 2/5, the other on 2/17. They both end in a signal for change, one with Jokari, the other with peaking volume and both with Pennant FBO. However, what came next in one case is totally different from the other.

 

1. Is this the matter of incorrect annotations? And 'something' indicates that the sequence for the non-dominant component of the slower down trend was completed in one case but not in the other?

2. Is this the matter of incorrectly understanding where sentiment change occurs? Both cases show a change signal visible on 5 min bars, therefore I assume there was an even earlier signal for change on finer tools (DOM, OTR, YM etc.).

2.a. Where precisely the change in sentiment occurs? Before the signal for change? After the signal for change, and if so would the DOM be the earliest one can know that the sentiment has changed?

2.b. And how does the point where one executes fits into and with the signal for change concept?

3. Is this the matter of something else and my looking at the 'dead' (static), end of day charts doesn't allow me see 'it'?

 

Any light you can shed on this subject would be enormously appreciated. I am looking at these two sequences and I can't figure out why they mean different things

[rs5 10]

Wednesday 17 February 2010

[ptunic 10]

Wednesday, Feb 17, 2010

[NYCMB 10]

Hi rs5, all Price/Volume Relationship students or Spydertrder,

 

Could you explain what Non-Stationary Window means? How is NSW formed? Does NSW affect Trendlines, Price movement, Gaussians, Fractals, WMCN, Contexts and Order of Events?

 

Also it seems NSW goes with VE and Move forward (over)---

 

1) NSW 08JAN2010: VE (non-stationary window moves forward)

 

2) NSW 09FEB2010: VE NSW moves over

 

3) NSW 16FEB2010: VE, close in gap, NSW moves over, repeat 2r 2b

 

TIA

[Spydertrader 10]

If you'd be so kind to comment on when the certainty occurs.

 

For someone attempting to learn the process of differentiation, certainty occurs when the market has provided a scenario where no other possibilities exist - save the correct scenario. In other words, when a trader does not understand where they sit with respect to the right side of the market (on their specific trading fractal), the market, at some point in the future, provides a signal which clearly indicates (beyond any and all doubt) what one believed to be true cannot possibly be accurate. For example, if a trader failed to understand how the 14:25 (all times Eastern and [close of] the ES) Bar ended one thing and began another, the market provided certainty at 15:40. At this specific point in time, the market has said, "It is for certain no longer possible for you to be thinking a down container is still being built."

 

For a trader who has completed the process of differentiation, certainty occurs on each and every bar - without exception.

 

The goal, for anyone who has yet to reach completion of the differentiation process, involves transitioning from where you find yourself today to a place where the vantage point provides certainty on each and every single bar - irrespective of market, time of day or trading fractal.

 

They both end in a signal for change, one with Jokari, the other with peaking volume and both with Pennant FBO. However, what came next in one case is totally different from the other.

 

"Signals for Change" develop all the time. What matters is whether (or not) they apply to you (based on your trading fractal). You have already differentiated Peak Volume (when noting it prior to an Order of Events completion) with respect to whether (or not) it applies to your trading fractal. You already do this without even thinking - most of the time.

 

1. Is this the matter of incorrect annotations? And 'something' indicates that the sequence for the non-dominant component of the slower down trend was completed in one case but not in the other?

 

Correct. The annotations shown do not accurately reflect that which the market has provided. Perhaps, it is a simple matter of fractal differentiation (when you can 'see' the faster fractals vs. when you cannot), or perhaps, you have focused too closely on the formation at the end. While I cannot state for certain which answer best fits your situation, my experience tells me, "It's a fractal thing."

 

2. Is this the matter of incorrectly understanding where sentiment change occurs? Both cases show a change signal visible on 5 min bars, therefore I assume there was an even earlier signal for change on finer tools (DOM, OTR, YM etc.).

 

Nah. The whole system tracks sentiment across any and all fractals. The YM leads the ES, so we can know (and mark as certain) a signal for change, and all sentiment shifts, will signal on the YM before doing so on the ES. The very same thing works with the STR-SQU leading the YM, and with DOM and OTR Charts leading the STR-SQU. As such, these things cannot provide the source of your error. In addition, ES, YM, DOM, Tic Charts, streaming tic by tic data; all did not exist in 1957.

 

As we eliminate the impossible, whatever remains (no matter how improbable) must be possible.

 

2.a. Where precisely the change in sentiment occurs? Before the signal for change? After the signal for change, and if so would the DOM be the earliest one can know that the sentiment has changed?

 

Jack used to have this slide he would show (called Min-Max) where sometimes a trader would 'see' a sentiment shift prior to a peak, sometimes a trader would 'see' a sentiment shift after a Peak. Jack would encourage every trader to catch things 'in between' these areas - taking action on the Peaks. However, such discussions focus on efficiency and effectiveness. These goals fall beyond learning how to 'see' that which one needs to see. In other words, it’s a bit like trying to fly before learning to crawl.

 

As I said earlier, the market tracks sentiment across all trading fractals, so naturally, one would want to focus on maintaining fractal integrity throughout the trading day.

 

2.b. And how does the point where one executes fits into and with the signal for change concept?

 

Once the market has completed an order of events (on the trader specific trading fractal), the trader simply waits for a Signal for Change. Once received, the trader takes action - enter (if sidelined), reverse (if already in the market) or exit (if at end of day). IF the Order of events (again, on the trader specific fractal) has yet to complete, then the action required is either: wait (if sidelined) or hold (if already in the market).

 

3. Is this the matter of something else and my looking at the 'dead' (static), end of day charts doesn't allow me see 'it'?

 

As I have moved through your post, it is looking more and more as if this is a fractal issue. Better put, it's a calibration problem resulting from your inability to see that which the market requires of each and every trading fractal. More than likely, you are close, but have not yet determined the exact binary sequence required.

 

I am looking at these two sequences and I can't figure out why they mean different things

 

You believe you are differentiating two things which are the same. They are not the same. Their context is completely different. Please note, I am not talking about the specific 'thing' at the end of these sequences. Those are the same[/b].

 

HTH.

 

- Spydertrader

[Spydertrader 10]

Could you explain what Non-Stationary Window means?

 

Actually, this is a very good drill for you (and anyone else with an interest).

 

What definitions of 'non-stationary' exist?

 

What definitions of 'window' exist?

 

Based on what rs5 has placed on her chart, which definitions (of 'non-stationary' and 'window') above do you think best apply to rs5's comments?

 

Of course, one could simply ask rs5 for the answer, but then, how would you be sure you didn't translate her answer (instead of transferring the knowledge from her brain to yours)?

 

Interestingly (or, maybe not), I used the exact same process whith the sentence, "The YM Leads the ES." Of course, I did so only after I had mucked up the works by translating the phrase - instead of transferring the intended meaning.

 

HTH.

 

- Spydertrader

Edited February 18, 2010 by Spydertrader
Spelling Error

[dkm 10]

What definitions of 'non-stationary' exist?

 

What definitions of 'window' exist?

- Spydertrader

 

<sigh>

 

The non stationary window simply represents the period of time from the beginning to the end of a volume sequence b2b2r2b or r2r2b2r. It is a window that begins at the start of the sequence and ends and the end of a sequence. When we reach the end of a sequence, a new window begins. The window is "stationary" for the duration of each sequence and then "moves" when a new sequence begins. Because it moves at the end of each sequence, it is considered to be"non-stationary". Clear as mud now?

 

IMHO the phrase is totally superfluous and confusing. Until an explanation is given for how one is supposed to determine what fractal one is looking at, those asking questions will remain confused. This thread could really go somewhere if we stopped the riddles and provided some clear explanation.

[cnms2 10]

... an explanation [...] for how one is supposed to determine what fractal one is looking at, ...

I use volume pace and sequences.

[dkm 10]

I use volume pace and sequences.

 

Would you be so kind as to explain how?