Is the Price to Volume Relationship All You Really Need to Trade?

[suby 10]

Hi guys,

 

I'm trying to develop a technical strategy to my trading and seem to be overwhelmed with all the different indicators...

 

Currently I use MACD, Price, and Volume....

 

Am I missing anything or is it naive to make calls on the Price to Volume relationship?

 

Would love some feedback from some of the pros

 

Thanks in advance!

[Tams 20]

Hi guys,

 

I'm trying to develop a technical strategy to my trading and seem to be overwhelmed with all the different indicators...

 

Currently I use MACD, Price, and Volume....

 

Am I missing anything or is it naive to make calls on the Price to Volume relationship?

 

Would love some feedback from some of the pros

 

Thanks in advance!

 

The market is generous, it beams tons of signals about its intention to all the traders around the world without discrimination.

 

Some traders can see signals in price,

Some traders can see signals in volume,

Some traders can see signals in volatilities,

Some traders can see signals in spreads,

Some traders can see signals in momentum,

Some traders can see signals in bid and ask,

Some traders can see signals in blocks,

Some traders can see signals in foot prints,

Some traders can see signals in delta,

Some traders can see signals in profile,

Some traders can see signals in time,

Some traders can see signals in ticker,

Some traders can see signals in harmonics,

Some traders can see signals in averages,

Some traders can see signals in stochastics,

Some traders can see signals in relativities,

Some traders can see signals in auctions,

Some traders can see signals in astrology...

 

don't worry about what other people see,

you have to have your own theory of the market:

you have to have your own theory of why the market goes up, and

you have to have your own theory of why the market goes down.

 

Your analysis is based on your theory.

 

So, my question is, what is your theory?

[DbPhoenix 42]

Yes, the price:volume relationship is all you really need to trade. You don't even need the MACD, much less any of the hundreds of indicators available.

 

Trading in this manner, however, is not for everyone. If you think you're cut out for it, see Trading By Price.

 

Db

[zdo 20]

I nominate Tams post for Post of the Month... and it's in the running for Post of the Year!

 

... will quote you when someone asks me what I mean by "Find your own way!"

[DbPhoenix 42]

Reading someone's posts is always helpful when trying to determine just where it is he wants to go, particularly when there are only 15.

 

Db

[suby 10]

Yes, the price:volume relationship is all you really need to trade. You don't even need the MACD, much less any of the hundreds of indicators available.

 

Trading in this manner, however, is not for everyone. If you think you're cut out for it, see Trading By Price.

 

Db

 

Hi DB,

 

I have read your post regarding Trading By Price and in it you even disregard Volume Bars....

 

Correct me if I'm wrong but the strategy you are advocating is more or less to develop Support and Resistance Lines when the price is consolidating and making a decision from there...?

[suby 10]

The market is generous, it beams tons of signals about its intention to all the traders around the world without discrimination.

 

Some traders can see signals in price,

Some traders can see signals in volume,

Some traders can see signals in volatilities,

Some traders can see signals in spreads,

Some traders can see signals in momentum,

Some traders can see signals in bid and ask,

Some traders can see signals in blocks,

Some traders can see signals in foot prints,

Some traders can see signals in delta,

Some traders can see signals in profile,

Some traders can see signals in time,

Some traders can see signals in ticker,

Some traders can see signals in harmonics,

Some traders can see signals in averages,

Some traders can see signals in stochastics,

Some traders can see signals in relativities,

Some traders can see signals in auctions,

Some traders can see signals in astrology...

 

don't worry about what other people see,

you have to have your own theory of the market:

you have to have your own theory of why the market goes up, and

you have to have your own theory of why the market goes down.

 

Your analysis is based on your theory.

 

So, my question is, what is your theory?

 

Thanks for the reply Tams

 

My theory,

 

The trend is your friend

 

Buy high, sell higher,

 

Sell low, buy lower

 

I can read the instruments I choose to follow, my problem is developing my methodology. Every where i read says keep things simple.

 

I have done research on stocastics and they work for some people and don't work for others

 

I am trying to make things as simple as possible hence why i like to assess the price to volume relationship. Are there any tips you can provide me with in regards to developing a methodology...

 

What does your methodology consist of.

 

I understand that ultimately I am in charge of developing my own strategy and making my own decisions and having my own view on the market and the price action of a stock; however, as someone who is more or less a rookie in technical analysis.... it is hard to get to your destination with out a map

 

I am attempting to develop my map, could you help?

[DbPhoenix 42]

Hi DB,

 

I have read your post regarding Trading By Price and in it you even disregard Volume Bars....

 

Correct me if I'm wrong but the strategy you are advocating is more or less to develop Support and Resistance Lines when the price is consolidating and making a decision from there...?

 

As the years roll by, I try to find ways of making this simpler. Unfortunately, as the years roll by, more and more beginners are -- shall we say -- "muddied" by an ever-increasing number of vendors and their nonsense. Once in a great while, I'll find somebody who's just starting out. In that case, the process seems to take no time at all. But more often the beginner has so much to unlearn that the process seems to take forever.

 

In the case of volume, yes, it is important. But so much bad information is out there regarding volume that trying to correct the errors is a task in itself. And so many beginners think that Forex is the greatest thing since store-bought soap, and Forex doesn't have volume, that leaving volume off entirely is a lot less trouble and just might make things clearer.

 

So, in a word, yes. If price is in a trading range, understand the dynamics of the range. If it isn't, understand the dynamics of trend. Volume can be helpful if you understand it. But if you hold a lot of wrong-headed notions about it, it's best to just set it aside and focus on price. Eventually, you'll be able to include volume again and you'll think "Oh yeah"...

 

And, of course, the less said about indicators and Fib and Pivot Points and so forth, the better.

 

Db

[suby 10]

As the years roll by, I try to find ways of making this simpler. Unfortunately, as the years roll by, more and more beginners are -- shall we say -- "muddied" by an ever-increasing number of vendors and their nonsense. Once in a great while, I'll find somebody who's just starting out. In that case, the process seems to take no time at all. But more often the beginner has so much to unlearn that the process seems to take forever.

 

In the case of volume, yes, it is important. But so much bad information is out there regarding volume that trying to correct the errors is a task in itself. And so many beginners think that Forex is the greatest thing since store-bought soap, and Forex doesn't have volume, that leaving volume off entirely is a lot less trouble and just might make things clearer.

 

So, in a word, yes. If price is in a trading range, understand the dynamics of the range. If it isn't, understand the dynamics of trend. Volume can be helpful if you understand it. But if you hold a lot of wrong-headed notions about it, it's best to just set it aside and focus on price. Eventually, you'll be able to include volume again and you'll think "Oh yeah"...

 

And, of course, the less said about indicators and Fib and Pivot Points and so forth, the better.

 

Db

 

DB what are your thoughts on candle stick patterns.,..?

[DbPhoenix 42]

DB what are your thoughts on candle stick patterns.,..?

 

Somebody asked me about this the other day. Click here.

 

Db

[zdo 20]

Most who are working the simple <-> complex axis are really attempting to move towards more certainty on the certainty <-> uncertainty axis

 

But - any certainty in trading is going to be low–grade (and also short lived) certainty

so … :"Simple" ? Forget about it!

 

…unless you don’t seek ANY adaptivity in your trading

To be adaptive, consider that you may have to turn towards making your trading as complex as it needs to be instead of orienting to and pushing towards more ‘simplicity’

[DbPhoenix 42]

Most who are working the simple <-> complex axis are really attempting to move towards more certainty on the certainty <-> uncertainty axis

 

But - any certainty in trading is going to be low–grade (and also short lived) certainty

so … :"Simple" ? Forget about it!

 

…unless you don’t seek ANY adaptivity in your trading

To be adaptive, consider that you may have to turn towards making your trading as complex as it needs to be instead of orienting to and pushing towards more ‘simplicity’

 

There is no certainty in the market. But that does not mean that it must be complex by default.

 

Db

[suby 10]

Most who are working the simple <-> complex axis are really attempting to move towards more certainty on the certainty <-> uncertainty axis

 

But - any certainty in trading is going to be low–grade (and also short lived) certainty

so … :"Simple" ? Forget about it!

 

…unless you don’t seek ANY adaptivity in your trading

To be adaptive, consider that you may have to turn towards making your trading as complex as it needs to be instead of orienting to and pushing towards more ‘simplicity’

 

Alright zdo....

 

your advice is sage but you still havn't provided me with any advice....

 

As i said earlier ultimately i make my own choices and decisions but one of the purposes of why i started this thread was to generate some insight of price to volume and what people use.

 

What does your trading methodology consist of?

[powyoung 10]

Emini Trading – Free Emini Trading Indicators from Emini-Watch.com

 

Try downloading the Better Volume Indicator from MT4 at Emini Watch.

This will give you the Volume Spread Analysis, which is basically relative volume. The regular volume indicators are useless. The better volume indicator gives you the Moving average of the volume for the last 100 days ( I use 22 days) You can see that when the volume is above the MA the market usually makes big moves, below and it chops.

 

Hope this helps.

[TheRumpledOne 14]

All you need to trade is a HORIZONTAL LINE!

 

YouTube video explains:

[Tams 20]

Thanks for the reply Tams

 

My theory,

 

The trend is your friend

 

Buy high, sell higher,

 

Sell low, buy lower

 

...

 

I am attempting to develop my map, could you help?

 

 

that's not your theory,

 

that's your strategy.

 

 

You apply your strategy to your theory.

 

before you can be profitable,

you have to know what you are applying your strategy to.

Otherwise you are just trading in random.

[suby 10]

All you need to trade is a HORIZONTAL LINE!

 

YouTube video explains:

 

TRO, you are a boss!

[zdo 20]

your advice is sage but you still havn't provided me with any advice....

 

 

That is a perfect description of a poster over on TradersLaboratory... I think his user name is zdo :rofl:

 

 

 

What does your trading methodology consist of?

 

My methodology is centered in MarketTyping the auctions first then, off that typing, dynamically applying a weighted array of 12 ( dumb, but not necessarily simple) systems… opposite of developing a system then discovering ‘filters’ to improve its performance … and another single word would require a book …

If we aren't in the same book, there isn't much sense in trying to get on the same page as someone ie I rarely discuss ‘edges’ with other traders – even face to face. If I ask someone a question about a method, most of the time they don’t have an answer that really goes to what I was asking… and typically when I am asked a question, any insights I do have seem to go whizzing off into space… There are many other ways to connect with someone else besides trying to pump them with my system…

I’ll just stick with “ find your own way”

 

Specific to “price to volume and what people use” – I only use volume in certain specific market conditions and it turns out mostly for exits in ‘OB’ or ‘OS’ situations. Except for certain block trade setups (seeUrmaBlume, etc) and also in a couple of isolated parabolic type exceptions , (and ironically, in relation to all the volume content in the trading community) I get more traction out of an ’indicator’ utilizing volume / flow of market orders than I do straight up volume, delta’s, book, or tape.

 

…and fwiw, I find nothing ‘wrong’ with classic volume work or volume oriented methods like VSA or even Hershey… but just am not personally inclined to use them day in and day out…

 

Maybe DBP can provide you some links to his OLDER material about using volume for entry at his S’s and R’s. it’s different from the methods that use Vol. all the time…

( btw, if I remember correctly he seemed to be trying to ‘stay in’ until next signif S or R was reached … if I were using that I would be less ‘ambitious’ with my targets… will leave it to him to add, correct, or transform as needed…)

 

What info do (or did) you derive from MACD?

Context?

Content?

 

All the best,

 

zdo

Edited August 14, 2012 by zdo

[DbPhoenix 42]

TRO, you are a boss!

 

While TRO and I don't exactly see eye to eye on the indicator thing, I find it hard to disagree with anything in the first post to his thread. Practical advice is hard to come by on message boards, while theory abounds.

 

TRO is a nice counterpoint to all the hemming and hawing and waffling, even if you don't buy into the indicators.

 

You might also be interested in the Reading Charts in Real Time thread, another no-bullshit contribution.

 

Db

[Colonel B 10]

Hi guys,

 

I'm trying to develop a technical strategy to my trading and seem to be overwhelmed with all the different indicators...

 

Currently I use MACD, Price, and Volume....

 

Am I missing anything or is it naive to make calls on the Price to Volume relationship?

 

Would love some feedback from some of the pros

 

Thanks in advance!

 

You are missing something that no one has mentioned in the posts so far. Ill get to that in a minute.

 

I don't use MACD or any other lagging math based indicators. Do they work??? Sure . Im not here to argue that. I bet there are tons of people making money with what ever I think is lagging or what not. You mentioned price and volume and this is what keyed me into this post. If you look at on a given day and put the volume into a profile you will get a bell curve. No surprise this method is called "volume profile." What you will notice is that most of the volume will be at a particular price and by volume profile users this is a magnet and usually not seen as an advantageous place to trade. Know as the VPOC. IMO you don't want to trade were every one is trading. You don't want to trade where lots of short term traders are trading either.

 

What you are missing is what you do want is to figure out where the institutions are trading and trade with them. Why? Because they move the market. That is why. Does this mean you should listen to Ben on the Squack and just go short when you hear Goldman getting short? NO But this is what volume is tipping you off to . You want to know what price did at certain prices and look to see if buyers or sellers are stepping in at that price then hit the bid or lift the offer and go. These should be predetermined price levels with obvious areas right behind them for failures.

 

Honestly there really isn't anything else but volume, price, and time. And maybe the FED but thats a different post for a different thread.

[suby 10]

While TRO and I don't exactly see eye to eye on the indicator thing, I find it hard to disagree with anything in the first post to his thread. Practical advice is hard to come by on message boards, while theory abounds.

 

TRO is a nice counterpoint to all the hemming and hawing and waffling, even if you don't buy into the indicators.

 

You might also be interested in the Reading Charts in Real Time thread, another no-bullshit contribution.

 

Db

 

DB,

 

What indicators do you trade with/ what indicators would you recommend?

 

Obviously this is subjective to each individual but I am curious to hear your insight on this.

[suby 10]

You are missing something that no one has mentioned in the posts so far. Ill get to that in a minute.

 

I don't use MACD or any other lagging math based indicators. Do they work??? Sure . Im not here to argue that. I bet there are tons of people making money with what ever I think is lagging or what not. You mentioned price and volume and this is what keyed me into this post. If you look at on a given day and put the volume into a profile you will get a bell curve. No surprise this method is called "volume profile." What you will notice is that most of the volume will be at a particular price and by volume profile users this is a magnet and usually not seen as an advantageous place to trade. Know as the VPOC. IMO you don't want to trade were every one is trading. You don't want to trade where lots of short term traders are trading either.

 

What you are missing is what you do want is to figure out where the institutions are trading and trade with them. Why? Because they move the market. That is why. Does this mean you should listen to Ben on the Squack and just go short when you hear Goldman getting short? NO But this is what volume is tipping you off to . You want to know what price did at certain prices and look to see if buyers or sellers are stepping in at that price then hit the bid or lift the offer and go. These should be predetermined price levels with obvious areas right behind them for failures.

 

Honestly there really isn't anything else but volume, price, and time. And maybe the FED but thats a different post for a different thread.

 

Colonel B,

 

Thank you for your insight!

 

I'm not sure if you use think or swim but do you know if it is equppied with the VPOC? If not what to you recommend for someone to use this tool?

 

 

"

What you are missing is what you do want is to figure out where the institutions are trading and trade with them. Why? Because they move the market. That is why"

 

How do you determine/grasp where institutions are trading? Volume spikes?

[suby 10]

That is a perfect description of a poster over on TradersLaboratory... I think his user name is zdo :rofl:

 

 

 

 

 

My methodology is centered in MarketTyping the auctions first then, off that typing, dynamically applying a weighted array of 12 ( dumb, but not necessarily simple) systems… opposite of developing a system then discovering ‘filters’ to improve its performance … and another single word would require a book …

If we aren't in the same book, there isn't much sense in trying to get on the same page as someone ie I rarely discuss ‘edges’ with other traders – even face to face. If I ask someone a question about a method, most of the time they don’t have an answer that really goes to what I was asking… and typically when I am asked a question, any insights I do have seem to go whizzing off into space… There are many other ways to connect with someone else besides trying to pump them with my system…

I’ll just stick with “ find your own way”

 

Specific to “price to volume and what people use” – I only use volume in certain specific market conditions and it turns out mostly for exits in ‘OB’ or ‘OS’ situations. Except for certain block trade setups (seeUrmaBlume, etc) and also in a couple of isolated parabolic type exceptions , (and ironically, in relation to all the volume content in the trading community) I get more traction out of an ’indicator’ utilizing volume / flow of market orders than I do straight up volume, delta’s, book, or tape.

 

…and fwiw, I find nothing ‘wrong’ with classic volume work or volume oriented methods like VSA or even Hershey… but just am not personally inclined to use them day in and day out…

 

Maybe DBP can provide you some links to his OLDER material about using volume for entry at his S’s and R’s. it’s different from the methods that use Vol. all the time…

( btw, if I remember correctly he seemed to be trying to ‘stay in’ until next signif S or R was reached … if I were using that I would be less ‘ambitious’ with my targets… will leave it to him to add, correct, or transform as needed…)

 

What info do (or did) you derive from MACD?

Context?

Content?

 

All the best,

 

zdo

 

ZDO. thank you for your feedback!

 

In regards to MACD, I am still learning however, what I have derived from MACD as a leading indicator is this.

 

When I track a stock or future, I follow it on the 1 minute, 5 minute and 15 minute charts.

 

MACD paints a different picture for all three of these time frames; however, I use it in conjunction with my insight of the stock/future and its behavior.

 

The biggest take away I have derived from it is, Buy when it dips below the 200 MA

[DbPhoenix 42]

DB,

 

What indicators do you trade with/ what indicators would you recommend?

 

Obviously this is subjective to each individual but I am curious to hear your insight on this.

 

I don't use any. Just support/resistance, price/volume, trend/range. No insight here. I just don't see the point of them since they don't tell me anything I don't already know from following price.

 

This is largely an outgrowth of auction market theory, which predates Market Profile, which is, I believe, what Colonel B is referring to. Click the link if you're interested. You'll also learn how to find the "VPOC" easily, without incurring any expense.

 

Db

[zdo 20]

The biggest take away I have derived from it is, Buy when it dips below the 200 MA

200 MA of price or using 200MA as the slow average?

 

...MACD as a leading indicator...

“leading” ??? Is convergence or divergence of two xAverages – relative to most recent extreme (hook) or contacts - really “leading” ?

 

I follow it on the 1 minute, 5 minute and 15 minute charts.

How many different timeframe combinations have you explored?

Tried ~3 min, ~15 min, ~60 min ?

Have you considered that a ~7 minute chart might replace all three?

(:haha:polarity– simultaneously joshing you and being serious here :missy:)

 

 

 

Some big picture comments -

Just by following the links and hints others are providing you herein, you are moving away from the 'simple'. In line with some others' recent posts (vpoc, etc), traders must learn to percieve, think, act/react differently at price (and value, etc) extremes than they do when price is 'in the middle'. Each individual will have more strengths in trading one than the other.

I'm bringing this up largely because "when it dips below the 200" is oriented towards the 'middle' type trades and as you naturally explore and experiment it is important to start building awareness of the distinct approaches required and ... awareness of how you personally percieve, think, act/react differently at price (and value, etc) extremes than you do when price is 'in the middle' - so that you can be clearer and more open to what your options and alternatives are.

 

By far the most common coping mech. is to specialize in one of them and 'sit out' the other. .. and I'm sticking with the term "coping mechanism" - as in "settling" - because in my own case and in every case in working with others where we've gotten to sufficient depth with it, it is suboptimal adaptations post - trauma (not nec extreme trauma) ie subsequent 'decisions of defeat', and not frustrations or lack of aptitudes, that ultimately precludes one from developing the right 'mindsets' (for sake of brevity) and 'strategies' for both the extremes and the middles (and other 'types' too)