The Secret (or Not) to Day Trading Futures

[AgeKay 10]

The secret to day trading is that there is no secret. Smart-ass, huh? Bear with me, I'll explain.

 

A secret means that not a lot of people know about it. When trading, do you want to look at something that only a few people are looking at? So that when you make the decision to enter, it's you against everyone else? Hell no! That makes no sense. Even Paul Rotter, probably the largest individual futures trader, said he wouldn't be able to go against everyone else if the market was going one way.

 

So you want to be on the side of with the most volume. And where does the majority of futures volume goes through? Trading Technologies' (TT) gateways (I remember a quote on their site that said about 70% of all futures volume goes through them). And what do you see on the screen of every professional trader? Columns of red, blue and prices. What is it? MD Trader that is part of TT's X_Trader (or a competing product that looks pretty much the same)!

 

Don't you think professional traders would tell TT if there was something essential missing on MD Trader if this is what they use all the time? What about X_STUDY (TT's charts that are also part of X_Trader). How many chart types does it support? Not many. How many indicators does that have? Not many, and most of them are based on volume. And why don't traders complain about X_STUDY? Maybe they don't look at charts for decision making? So might it be possible that all the information you need can be seen on this small MD Trader window? Is this even possible? Paul Rotter (same guy I mentioned above) says he looks at charts for orientation, but doesn't make decisions based on that. What does he use to make decisions? The MD Trader! (Btw, this is not a commercial for MD Trader, you can use any competing product that shows you the same information). And what does MD Trader show you with just 5 columns?

 

• All Bids

• All Offers

• Last Trade (Price and Size)

• Volume by Price (a.k.a. Volume at Price, Market Profile, etc)

• Your Orders inkl. your estimated position in queue (shown as EPIQ)

 

Why is this relevant? Because this is a market, not some magic world. Bids and Offers make a market and the last trade shows transactions that took place in that market. See, this is simple. This is just a market, no magic. Think of it as a bazar. No one uses charts or indicators on a bazar to make the decision to buy or sell something. Same with the trading pit. And traders in the trading pit also use something else: noise. Noise meant momentum. How can you see momentum in the MD Trader? It's how quickly bids and offers change and how much is how quickly traded. So momentum is another important information that you can't put in numbers, but you can feel looking at the order book.

 

What about Volume by Price? It allows you to find out how much has traded at a price when the last trade information is changing too quickly. It also summarizes the entire day's trading. You don't know whether the volume that you see there are still open positions or whether they have been already closed. But some of them are likely to be open. And those traders care where price is right now. You don't know when the traders that are on the losing side are going to puke, but you know that they are going to puke at some point. And that point comes closer the more the market moves against them. And they don't care whether there was an S/R on the chart or there is some indicator telling you to buy or sell, when they want out, they get out and this will affect the market.

 

What about EPIQ? It shows you how likely it is that your limit order is going to get filled. Do you really need this? No, but it's good to know. No reason to enter at market, if your EPIQ is 10 and you expect a few more trades at that price.

 

 

I hope I've given you something to think about. And please don't flame me in this thread, it won't change anything. That's like saying Newton's law of gravity does not apply to the part of the world that you live in. It is what it is.

 

I'll post a few snippets of my favorite posts made by other traders from this forum to illustrate what I mean by all this.

[AgeKay 10]

This is shortened post made by namstrader but the original author is someone else. namstrader just received it in an e-mail. I've bolded what I like you to take away from this post.

 

Indicators are just a way to choose and filter the best chances to win over other ones [...] There are basically only five things we can look at and we can twist up in 1000 different ways - the high, low, open, close and volume data of previous price events. These are all really important to know but what they don't do is tell you buyers can't push prices past 1377.50 - RIGHT F'ING NOW. Sorry for the drama but I am trying to impress on you that price action is what really matters. That information is right on the entry chart and as plain as the nose on your face. The bottom line sadly enough is that there wouldn't be much of a trading industry if everyone new the real secret of scalping is just looking at two numbers which constantly change throughout the day. Those dynamic numbers are called support and resistance and those coupled with the interperatation of how participants are acting at and on these levels is the real key to scalp trading. How could it be that easy? It is - and then again it isn't and that is why 90% fail.

 

The best futures traders in the world are trading the pits on a handheld with X-trader. No indicators. No charts. All they have is a DOM and a sense of what and who is moving the market as represented by PRICES and the number and size of participants at those prices and whether there are more sellers or more buyers - that is it. It really is pretty basic and deceptively simple. They make note of intraday support and resistance levels as they change and the floor pivots for the day/month/week which don't change, etc - all centered around you guessed it, the PRICE RIGHT NOW...The spaces BETWEEN these levels are the trading opportunities [...]

 

Could you trade with just this and a pencil and pad to make notes? Maybe not yet, but you will be able to some day if you take to heart what I am telling you. My best friend is one of these guys. He trades the SP in open outcry and consistently makes $750,000 a year from his seat. So do I, in fact I made over $1,000,000 last year. I'm not bragging and I know that is an insane amount of money, but it is true and I am living proof that a guy with average intelligence can get filthy rich trading the S&P. There is more to life than money, but in this game it is how we keep score. There is no other way to evaluate the success of what we do. I grew up in the woods with no running water and used an outhouse until I was 13. Point made.

 

[...]

 

I am sick of hearing people say that 90% of traders lose because the market chews them up or the system doesn't work or whatever. That is just BS. The problem is those traders spend all their time playing with indicator values or analyzing timeframes or whatever and they miss the whole point of what they are doing here. This is a MARKET. All markets have buyers and sellers. I don't know why everyone can be experts on value when they look at items in a store or a piece of real estate or whatever but not in the market. If you wanted to sell your house for 500k and you had nobody even look at it in a booming market what would that tell you? The price was too high. Would you then raise the price of the house the next day? Of course not, you drop your offer if you wanted to sell it. You see what I mean? Markets make sense when we are talking about real estate or whatever, but people just blindly look at indicators and follow systems even in the face of obvious current pirce information. Example: in the last 5 minutes price has had a high failure at 1350 three times and is currently trading at 1348. Do you take a long setup here because a momentum indicator is above zero and the 9 day moving average just crossed over and above the 20 day? Why not, don't we always have to stick to our trading plan - blah, blah, blah? That is a great example of how traders follow systems to the letter and then scratch their head because they can't figure out why they are losing. Into the 90% pile they go. This isn't a ridiculous example either. This scenario repeats itself about once every 10 minutes on most days in any market.

 

In closing I would like to give you an exercise. Turn on a simulator of some kind or use a pencil and paper. I want you to put up one chart of any market you like in a timeframe that moves but is not too fast or too slow - say 250 ticks in the ES or 75 in the YM. I want you to use nothing but the one chart and the DOM to trade. Turn off the news too. From 9-9:30 spend exactly 1/2 hour looking over previous and current price action. Find the S/R levels - there won't be two, there will be several on each side. Write them down. Don't forget, resistance becomes new support and vice versa. You should also use the floor pivots as well. How will you set your targets and stops? It is right there in front of you. See how obvious it is? Trade this from 9:30-10:30 EST EXACTLY like you would with Ryan's system, but without the indicators for the moment and tell me how you did. Wait for pullbacks within strong price pressure and don't take any trades against recent S or R zones within a few points. Give it an honest run and let me know how you do. If nothing else it will show you how weak, as once was, you are at really seeing the market for what it is - a mess of chaotic buyers and sellers that actually does have a very measurable pulse. It will just take you a while to find it. When you do, look out world, here you come! Then add Ryan's filters on top of that and you will be deadly accurate.

[AgeKay 10]

I bolded the important stuff again.

 

I'm not saying that TA has no place, it is a useful support tool, but as I mentioned in another post, every half decent prop firm that i've ever seen will make their traders look at nothing but the book for at least a month. There's a reason for that, and what you should take away from that is if that's how the professional industry train their traders, who have a way higher success rate than retail traders, then maybe, just maybe you should be doing the same?

 

When I refered to TA in my previous post, I was refering to price charts which are just a representation of the past, which it is, no matter how you try and cut it. The order book on the other hand is what is happening right now, which is extremely important.

 

Higher time frames then it's a different ball game, traders managing funds long term etc. I've never traded in this way personally, but my friend who used to sit next me at the firm I started at, he does all that stuff now days. He was completely hopeless at day trading, but his fundamentals were second to none, which is what he trades. Like I say, his track record is faultless, but like I say, not something i personally do so I can't comment

 

So many different trading styles with different methods, but if you're a day trader, in my professional opinion you need to learn to read what is happening now, not 5mins ago. There's always going to be someone who says they're doing well using just XYZ and not using order flow etc, but even if they're are, they're not doing anywhere near as well as what they could be if they knew order flow.

 

A good example would be that there's been loads of people moaning as of late about how quiet the markets are, but if you take the time to learn how price trades on the book it has been quite easy this year really.

[AgeKay 10]

I bolded the important stuff.

 

The resting orders are only half the story and alone are not really going to tell you too much. What you also need on your order book is cumlative volume which shows the total amount of contracts traded at each price, so you can actually see how many contracts are trading.

 

Now typically, price will have a tendency to trade towards large bids and offers, so if we look at ES as an example, a large bid or offer in the that market is normally 2000-3000 resting orders. This is where the so called games people talk about take place... it's nothing new though and has been going on for donkey years. To keep it simple, say ES trades up to a hypothetical resistance level at 1100. When we get to 1100, if the offer is much larger than the bid with blocks of 2000-3000 lots resting, what a lot of people will try to do is lean on these resting orders to get short. What is actually happening is a large trader is putting up them large offers to make the market appear weak, which incourages people to lean on his orders as described above. What this does is cause the market to tick off lower where he can buy a lot more and smash price through the level by running the stops of the people who were leaning on his fake large offers.

 

What you have to do is recongize that this is happening, and as the market ticks off lower, you need to be looking at the cumlative contracts traded to see where that big fish is buying a lot more lower down.

 

So carrying on with the above example, lets say those people have started leaning on his large fake offers and the market has ticked down to 1098.75 where previously, 20,000 contracts have traded. Now as the market ticks off, if another 10,000 contracts trade there bringing the total to 30,000, and price keeps on bouncing on 1098.75 even though 10,000 contracts have just traded there, then you want to be buying there yourself and catching a ride on his tail as he smashes peoples stops....

 

If you're doing it properly, the market shouldn't really ever go more than 2 ticks against you in ES. If it does, just cut it.

 

If anyone has any questions, then feel free to PM me.

[AgeKay 10]

I bolded the important stuff (I have to write something here because this forum does not allow just posting qutoes).

 

Trading by price -- and "volume" -- requires a perceptual and conceptual readjustment that many people just can't make, and many of those who can make it don't want to. But making that adjustment is somewhat like parting a veil in that doing so enables one to look at the market in a very different way, one might say on a different level.

 

One must first accept the continuous nature of the market, the continuity of price, of transactions, of the trading activity that results in those transactions. The market exists independently of you and of whatever you're using to impose a conceptual structure. It exists independently of your charts and your indicators and your bars. It couldn't care less if you use candles or bars or plot this or that line or select a 5m bar interval or 8 or 23 or weekly or monthly or even use charts at all.

 

Therefore, trading by price and volume, or at least doing it well, requires getting past all that and perceiving price movement and the balance between buying pressure and selling pressure independently of the medium used to manifest or illlustrate or reveal the activity.

For example, the volume bar is a record of transactions, nothing more. The volume bar does not "mean" anything. It does not predict. It is not an indicator. Arriving at this particular destination seems to require travelling a tortuous route since so few are able to do it. But it's a large part of the perceptual and conceptual readjustment that I referred to earlier, i.e., one must see differently and one must create a different sense of what he sees, he must perceive differently and create a different structure based on those perceptions. As long as one believes, for example, that "big" volume must or at least should accompany "breakouts" and clings to this belief as ardently as he clings to his rosary beads or rabbit's foot or whatever, he will be unable to make this perceptual and conceptual shift.

 

If you can work your imagination and use it to travel in time, you will have a far easier time of this than most. Imagine, for example, a brokerage office at the turn of the 20th century. All you have to go by is transaction results -- prices paid -- on a tape. No charts. No price bars. No volume bars. You are then in a position wherein you must decide whether to buy or sell based on price action and your judgment of whether buying or selling pressures are dominant. You have to judge this balance by what's happening with price, e.g., how long it stays at a particular level, how often price pokes higher, how long it stays there, the frequency of these pokes, at what point they take hold and signal a climb, the extent of the pokes, whether or not they fail and when and where, etc., all of which is the result of the balance between buying and selling pressures and the continuous changes in dominance and degree of dominance.

One way of doing this using modern toys and tricks is to watch a Time and Sales window and nothing else after having turned off the bid and ask and volume. But this wouldn't do you any good unless you spent several hours at it and no one is going to do that. Another would be to plot a single bar for the day and watch it go up and down, but nobody's going to do that, either. Perhaps the least onerous exercise would be to follow a tick chart, set at one tick. Then follow it in real time. Not later, but real time. Granted this means a lot of screen time and only a handful of people are going to do it. But those few people are going to part that veil and understand the machinery at a very different level than most traders.

 

Once this is understood, the idea of wondering -- much less worrying -- about what a particular volume bar "means" is clearly ludicrous, as is the "meaning" of a particular price bar or "candle". If it is not understood, then the trader spends and wastes a great deal of time over "okay so this volume bar is higher than that volume bar but lower than this other volume bar, and price is going up (or down or nowhere), so...".

[AgeKay 10]

I bolded the important stuff.

 

Using price action as a basis to make trading decisions is possibly one of the most straight forward and simple ways to trade. Understanding how and why these things are as they are takes a bit more work and the perceptual shifts that DB talks so eloquently about. There are few (if any) better places to help you understand why (and the how for that matter) than the Wyckoff area here.

 

Just as it is not necessary to understand Newtons universal theory of gravitation to collect apples from the foot of a tree, it is not necessary to understand why markets move as they do to capitalise on those movements. There are numerous good resources that demonstrate different possible 'hows' without paying to much attention to 'why'. If you are anything like me you'll want to know why though to some that is not important.

 

A short comment on prediction. It is not necessary to predict to trade successfully, in fact the emotional attachment you are likely to get through trying to predict can be detrimental to trading without bias. The way most people apply price action is they see how it has behaved in certain areas in the past (finding potential areas of support and resistance if you like). They then monitor (in real time) what price does when it reaches that area again. There is a degree of anticipation but it is more about what is happening now than what might happen.

 

In a nutshell 1) use historical price action to give potential trade areas. 2) Use 'real time' price behaviour to determine if you have a trade in those areas. Pretty simple if not easy

[AgeKay 10]

I bolded the important stuff.

 

The biggest road block for retail traders is pandora's box. In my opinion and experience, 99.9% of retail traders are chasing and worrying about things that actually have no important relevence to profitable trading.

 

Most of the retail community are focusing on learning things that are going to get them no where. It's like building a house.... but focusing on the garden for the whole project... no matter how nice the garden is, it isn't going to build that house.

 

If you learn how to trade professionally, any self respecting firm won't let you look at any charts for a month at the minimum. This is why I call it pandora's box, as when a retail trader gets involved with trading, they're opening pandora's box and making all the unimportant things important, and all important things unimportant. Most have it completely back to front, but instead of realizing and accepting that, they'll say it's the mental side, or it's this or that... basically they're blaming themselves.

 

The truth is, if you're trying to make a cake with a sledge hammer, it doesn't matter how disciplined you are, how mentally strong you are, how devoted you are etc... it just isn't going to happen because you can't make a cake with a sledge hammer, just like you're not going to be consistently profitable as a day trader by just staring at charts and techncial analysis, or following indicators or systems. You need to learn how to trade if you want to make money from trading. Don't learn how to be an analyst, and then be surprised you've made no money. At the same time however, 99.9% of people on this forum have made no money, but as mentioned, most will think there's something wrong with them and that they're their own reason why they have not succeeded. Like I say, most of you are following the piper over the hill into the magical forest, so it's not a reflection on your personal ability to trade, it's just a reflection of the b.s that you're following...

 

Just my 2 cents

[AgeKay 10]

I bolded the important stuff.

 

The trend is your friend, but in day trading you need to learn how to guage price action and momentum in the market. You have to remember that support and resistance levels are not set in stone, they are merely points where you can enter the market, but price action and momentum will determine how you use the level. So for example if price is trading quickly to the upside, momentum in the market is high and there's high volume to add fuel to the fire as well as strong open interest to the upside, then in this case you shouldn't be looking to sell a resistance level above you, if you did you would be standing infront of a steam train trying to fight the market. In this situation the highest probability trade is to wait for the level to break and turn to support and then use it as an entry point to get onside with the trend and momentum.

 

[...]

 

As for letting your profits run, this is also true. If you're in a position and you have no reason to get out of it, then why get out? When you lack the ability to read how price is trading and momentum then you have no way to gauge the strength of your position. For example if you're long, and after 5 points price starts to struggle to trade higher, the open interest on the book is leaning more towards the offer, and there are very large parked orders on offer that won't lift no matter how many times they get high ticked, then you gotta start thinking to yourself to this move is coming to an end.

 

Learning how to read price action and momentum is key to being a consistent day trader, but unfortunate it's also the hardest aspect to get a feel for and the only way to learn it is to put in the screen time. There are no indicators that are going to do it for you, you gotta put the hard work in.

 

Welcome to the hard knock life of trading

 

You'll get there in the end as long as you put the hard work in.

[AgeKay 10]

I bolded the important stuff.

 

Lots of people seem obsessed with volume thinking that price will follow it. So for example they would be looking for volume on a break out to confirm etc, and when the trade does won't work out, then they're left wondering why because it did it on volume. What you should be doing is watching how the price is trading, watching the speed of it, watching out for the current open interest, watching how many is trading into the bids and offers, keeping an eye on parked orders on the book, asking yourself which side is heavier, watching the flow of balance in it, watching out for large parked orders and watching if they lift or not when high ticked. These are just some of the things you need to be looking at constantly when trading day trading.

 

Volume is just the sum of a trade, nothing more.

[AgeKay 10]

I bolded the important stuff and left out a few examples.

 

Momentum and S/R goes hand in hand, to be able to use s/r levels effectively then you need to be able to gauge momentum and how price reacts around those levels.

 

[...]

 

Now generally you want to be trading with momentum on your side, so it helps identifying the areas where momentum is likely to pick up. So when the market is chopping back and forth between support and resistance levels, momentum, depending on the size of the range won't be at it's best. However when a key area in the market is breached then one expects an increase in momentum. Trading these areas where the momentum increases will help keep you out of the chop.

 

[...]

 

Trading with momentum is always advisable regardless of trading style.

 

[AgeKay 10]

In case you were wondering why I quote 86834 so much. Yes, I have a secret crush on him. Important stuff is bold again.

 

 

If you want to trade break outs, then you should be looking at the bigger time frames such as daily, monthly and weekly for key s/r levels and over all direction in the market. For example, last week in ES has been a great trading week as the market has been repeatedly trying to test resistance on the daily chart and consolidating, and on the weekly time frame we're approaching key resistance. I've attached a couple of charts....

 

Remember that 'day trading' simply means that you close out your positions at the end of the day. It doesn't mean that you're restricted to use small time frames like the 5min chart, which isn't really going to tell you that much in the grand scheme of things. You need to know what the market is doing, and looking at the large time frames will help you identify this so that during a trading session, you can position yourself to take advantage of the big runs and breakouts during the day. There's no point taking a breakout to the upside on a 5min chart when there's key weekly resistance 2points above you.... trade smart....

[AgeKay 10]

The bolds in this quote were not added by me, they were already in UrmaBlume's original post.

 

 

[...]

 

We feel that the bid/asked approach to designating buying or selling volume is flawed in several ways and the synchronization, or not, of these feeds is not part of our calculations.

 

To demonstrate one of those flaws, please consider the situation where a very large buyer places a limit order at the current asked price - the order is larger than the asked size so he is partially filled at the asked and as the order took all the asked size the asked moves up and so does the bid. Now the remainder of this large buyer's order is on the bid and trade that fills this large buyer, on his bid, is recorded as selling volume. Thankfully there are intelligent agents capable of sorting all this.

 

The formation of many local extremes, especially in the futures and options on the equity indexes, is a result of the bid or asked being replenished by auto placement at a rate faster than the market can absorb. Thus action at the top would not reflect this selling and show a top/reversal made on buying instead of the selling that is represented by this auto replenishment of the asked.

 

Anyone with direct experience with the application of such systems will verify that great lengths are taken to 1) disguise this trade and 2) increase the effectiveness of the buy or sell by making both buys and sells - as they used to say in the past - "sometimes you can sell a few to help you buy many at a better price." When when backed by unlimited resources and done by very smart code executing in the microsceond time frame, this approach can be very effective indeed, plus it confuses the competition.

 

This is an example of a strong move up that runs into opposing activity and demonstrates one of the main flaws in VSA - it shows in at least one instance that a move up on dramatically increasing volume is not bullish - it means that rising prices have found the seller and the volume recorded at this extreme is shown as buying when it is the opposite.

[DionysusToast 10]

Good stuff - I likey.

[joshdance 10]

AgeKay, thanks very much for this. I particularly like the first two or three posts; the later ones start sounding like typical stuff and I was a bit disappointed in those, however, the first ones regarding simplicity are just golden.

[AgeKay 10]

You have to be in the right frame of mind to appreciate all of those posts. I remember how my believes of trading changed over time and it's remarkable how much information you filter when you read something. Everything you read that agrees with your point of view is confirmation of your believes and you disregard everything else. That's just how we humans work. I notice how I reread the same information I've already read earlier and it's like I'm reading something completely different. I had to unlearn a lot of misinformation. I wish I had never read a trading book or trading forum before starting to trade. It would have saved me so much time.

 

Here is another great post by 86834 that emphasizes this phenomenon. I've shortened it a bit and bold the important stuff:

 

 

[...]

 

Like i say, i repeat i'm not knocking anyone, or putting the forum down because i think it is a great place for people wishing to know more about trading to come together. However when i read posts like these they are full judgmental heuristics

 

The heuristics are all over the place because 99.9% of traders trade their beliefs about the market, and once they've made up their minds about them beliefs, they're highly unlikely to change them. So when you go and trade whatever market, you think that you're considering all the available information (all i need is a bar chart, price actions tells me everything), but instead you've just eliminated most of the useful information thats available by your selective perception.

For example when you're looking at a 5min candle stick chart thinking thats all you need, then that a heuristic called law of representation, meaning that you are assuming that something is assigned to represent something. So you look at you candle charts and think to yourself that it's the market trading, when in reality it's just a line on a chart, no more, no less. However you accept this as being meaningful because...

• you were told it was meaningful when you first started studying the markets,
  
• everybody else uses candle stick chart to represent the markets
  
• when you think about the market trading you typically visualize a daily bar
  

A candle chart doesn't tell you anything about how much activity occurred, and it doesn't show you how much activity occurred at what price. There is a lot of information that is extremely useful to a trader that isn't shown in any form on a candle chart. For example did the transaction involve opening up new contracts or closing out old ones? What kind of people were doing the trading? Did a had full of floor traders trade with each other all day long, trying to outguess and outmaneuver each other? How much of the activity was in a single unit, how much activity was in large units. How much was traded by a single trader, how much was traded by large funds or institutions?

Also a candle chart doesn't show who's in the market, like how many people are long and short in the market and what their position size is. All this information IS available. I can go on and go, like how chart gives you no psychological information such as how many people are sitting outside of the market with the belief it will go up or that it will go down, and are they likely to convert them beliefs into trades.However it doesn't really matter that much because you wouldn't be able to trade using any of it because of your judgmental heuristics and biases. The information will be eliminated by your selective perception

 

There are so many biases that non professional traders (even some profession traders) have. For example the lotto bias... which is about the increased confidence people have when they, in some way manipulate data, as if manipulating that data is somehow meaningful and gives them control over the market. Because you think the candle chart is the best method for trading toy manipulate the chart in some way until you feel confident enough to trade it.

 

[...]

 

You need to overcome the biases that are affecting you or you will never be a good trader. Like i've said, making a couple of million off a candle chart doesn't make you a good trader. You need to consider biases such as

 

representation bias - people assuming that when something is supposed to represent something, that it really is what it's supposed to represent

 

reliability bias - people assuming that something is accurate when it may not be

 

lotto bias - people wanting to control the market so they get all hung up on indicators and entry signals and all that rubbish

 

Conservatism bias - once you believe you have found such a pattern and become convinced that it works, you will do anything you can to avoid evidence that it doesn't work (i think of you w in particular here....)

 

randomness bias - people like to assume that the market is random and has many tops and bottoms that they can trade. The markets are not random at all. Distribution of prices who that markets over time have infinite variance, or what statisticians call long tails at the end of the bell curve. People fail to understand that the even random markets can have long streaks, and as a result, trying to trade tops and bottoms is the most difficult type of trading there is

 

Then even once you accept these, then you need to integrate stuff such as degrees of freedom and postictive errors

 

[...]

 

Market conditions are reflected by the people trading them, now days the day traders from their bedrooms are gone and the massive majority of the financial markets are professional city traders. There's few places at the top and if you really want to make it in this game you need to pull out all of the stops and fight to stay. Yeah you might have something thats working now for you, but it won't last, and how many of you will make enough money in a 2/3 years to never have to work again?

 

Like i say, look at the dotcom traders....

 

Boost!

[friva 10]

Whatever people find useful it is useful for them and I respect that.

Personally I never found anything in volume analysis that proved reliable in the long haul.

I sure felt excited at times for the like of OBV and other volume related indicators/techniques, however they never proved really reliable in my experience.

Money in is always equal to money out at all times in all markets.

 

Anybody out there can make a case for volume analysis using a ten rows statement ?

If there is really something true to volume analysis you do not need more than that to explain.

 

best

F

[joshdance 10]

Anybody out there can make a case for volume analysis using a ten rows statement ?

If there is really something true to volume analysis you do not need more than that to explain.

 

Volume indicates participation. Participation comes from both sides. When the side opposing a current move is interested enough to join, they have the potential to slow down or stop the current move. Observe the effort of volume, and notice the effect on the result of price. A large effort with minimal results indicates that the participation from the other side of the current move has shown enough interest to slow it down, potentially for a reversal. What is key is what happens AFTER this. Does the other side gain momentum, or does the current move resume? If the current move resumes, is the volume (participation) as large? If it begins to reverse, does the other side show enough participation to reverse the direction of price?

[pbylina 10]

The secret is out.

[friva 10]

thank u joshdance,

 

that's a 6,5 rows statement + 3,5 rows of questions that I was never able to answer in a systematic way, at least when it comes to short term market action.

 

Sure if you know how much money the bulls want to spend buying a stock and how much stock the bears are willing to sell in a unit of time you can tell how much the stock will move and in what direction over that time span.

 

That you can try to do if you have enough good friends seeing brokers order flow.

Checking volume exchanged won't help much, though.

 

Market Depth Analysis, strangely enough, I find tends to work the opposite way you would expect, at least for DAX and FTSEMIB futures.

Like a friend puts it: "if the tossers really want to sell they serve, not show offer".

That is a way to "read volume" but it is of limited help, I found.

 

I think one can devise a theory of how volume patterns are a reflection of changing moods, ie of the pace at which bulls change their bullishness relative to how bears change their bearishness, but I do not know how to do that in a workable way, at least for the timespans I am interested in, which most people would find very short.

 

However I guess volume analysis might be more relevant in the medium to long term, meaning weeks or months.

 

The secret is still a secret, I am afraid

[joshdance 10]

However I guess volume analysis might be more relevant in the medium to long term, meaning weeks or months.

 

The secret is still a secret, I am afraid

 

I have found just the opposite to be true--volume analysis helps me immensely in the short term -- long term is a toss up for my personal read, as too many sociopolitical and world events thrown into the mix.

 

I would suggest you put up a volume chart that gives you a comfortable pace, a 1m chart with a volume histogram, and if possible a volume profile. Also, open up the time and sales. Just give things a look, see how you like that view of the world. Have no preconceived notions, no ideas about what works and what doesn't.

 

Part of the problem I had was that I was looking for some general rule, like, volume increases on the way up meant continuation, or a volume going down pattern meant lack of continuation, etc. .. throw those generalities away, and just watch. You might be surprised at what you observe when you are making your own observations, rather than going on what you think is supposed to be true.

[AgeKay 10]

I appreciate the input, but I would like to ask all participants in this thread to not turn this into a volume analysis discussion or any other discussion. Read it with an open mind. If you agree, great, if you don't, then just come back a few years later when you might see it differently.

[joshdance 10]

Sorry AgeKay, was just about to post that I'm sorry for sidetracking the thread. Looking forward to more great posts.

[friva 10]

sure, "assume nothing" is what I live by

[fxdummie 10]

I am a visual person,

reading and agreeing 100% with what is said about the market wouldn't do me any good if I don't see it on a chart with price action, volume, s/r and so on.

 

I would love if this thread originator show me (or refer me to) how does he uses this knowledge to make money. Not challenge just curiosity!

 

Thanks!

[HARDMAN_GAZ 10]

To the OP,

 

Good thread, classic information. I read your thread with a sense of relief, not everyone has sold their soul to the devil and spot forex(spit).