Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

Soultrader

Average Volume Question

Recommended Posts

Since the the tumble of the indexes we are experiencing higher volatility and higher volume. The question is: Should traders consider the current volume as the norm? For example, today's rally on the YM occurs on a lower volume bar compared to the last 5 trading sessions. HOWEVER, this volume bar is well above average comparing the volume bars for the past few months.

 

How would you view this?

Share this post


Link to post
Share on other sites

See.. I would assume technicals become less helpful when the market is expressing climatic emotions. And the past few days have been nothing but emotions/momentum. Or should I take this into account as well?

Share this post


Link to post
Share on other sites

I think that the huge volume on the market downtrend after last week was most likely due to a lot of stops being hit and it snowballed. With the large decline in price we saw plenty of buyers coming into the market to snap up bargains. A lot of these traders were longer term traders I think who saw these new lows as a great opportunity to top up their positions.

 

I'd expect that the lower volume on the rally is due to a bit of trepidation amongst buyers. Newer traders especially who might not have had the confidence to buy into a falling market would of waited until the rally was well underway before committing therefore volume on the rally is effected.

 

Specifically, i think that you need to take the daily volumes as being relative to eacother. Lower volume on the rally relative to the higher volume on the decline shows weaker support for the buyers!

 

I would say that you can make a more informed decision as to the normality of this new volume within the next few days for it could just be an abberation.

 

Im speaking of my own local markets of course but I'd assume the same applies to all you traders who trade the US markets!

 

Not sure if that answered your question lol.

Share this post


Link to post
Share on other sites

I believe its clear we had a low volume up correction taking a look at the inmediat context, looks more like shorts covering, with no new longs... thats the first impression.... I always asociate the amount of volume directly proportional to the standard deviation, if volatility comes down so volume will come down... as ranges are still high, todays volume was low... cheers Walter.

Share this post


Link to post
Share on other sites
Since the the tumble of the indexes we are experiencing higher volatility and higher volume. The question is: Should traders consider the current volume as the norm? For example, today's rally on the YM occurs on a lower volume bar compared to the last 5 trading sessions. HOWEVER, this volume bar is well above average comparing the volume bars for the past few months.

 

How would you view this?

 

Volume Spread Analysis teaches us that volume is activity.

 

Volume should be looked at in two ways:

 

1. relatively- today's volume compared to the previous bar or bars

 

2. Actual volume

 

In this case the up day has come on volume less than the previous two day's and closed on its high. This is No Buying pressure. In a perfect world, today would have actual volume that was less than average, but the fact that it is relatively low is enough.

 

It may be the case that the Professional money is not interested in higher prices at this time. 85% of all volume represents Professional Money so if it is decreasing, their activity, or interest, is decreasing. Why would their interest be decreasing? They do expect higher prices at this time.

Share this post


Link to post
Share on other sites

Here comes the devil's advocate...

 

Why the concern with how much volume is being traded today vs. yesterday vs. last Monday vs. last month vs. last year, etc?

 

Don't get me wrong, I watch the daily volume simply to ensure that the markets I am trading are liquid enough for my trading, but rarely do I see a dropoff in volume that causes concern simply b/c of liquidity.

 

Now, with that being said, I trade on volume/share bar charts. Please don't misinterrupt my question of the comparison of volumes over different timeframes. I want to see volume each day and want to see it during the morning session, hence the reason for the volume charts; however, I really don't care if today's volume is more or less than the previous day (or any other timeframe) when trading on an intra-day basis only. When you are trying to take little moves throughout the day, the important thing is to capitalize on those moves.

 

The reason I mention this is that you can find days where strong volume equated to big moves and days where strong volume resulted in choppy or weak conditions. And of course, the end of day volume is great to know in hindsight, but as you trade during the day, you have no idea what to expect in terms of volume.

 

My opinion Soul is to not be concerned with the day-to-day volume changes. We know volume fluctuates daily and we know that high volume days can be followed up with higher volume days and/or lower volume days. You don't know till the end of the day. I think the real concern is being able to capitalize during the day when there is a good flow of volume in the market. For me, that resulted in volume/share bar charts visually depicting when there is volume in the markets.

Share this post


Link to post
Share on other sites

browsfan : from an intraday aproach its ok what you say, now its interesting to see sometimes the big picture too... and volume has a lot to say on this big picture... it even told us that there was an inminent downmove as there was no more important volume on the previous top up moves... I dont know if you looked this video http://www.traderslaboratory.com/forums/f66/warning-signals-volume-1286.html it can be very usefull to know in witch overall context your small intraday trading can be (I trade a 22 tick chart, very small trading) but now I take into acct this daily context information, I can know more the general bias of the market... cheers Walter.

Share this post


Link to post
Share on other sites
browsfan : from an intraday aproach its ok what you say, now its interesting to see sometimes the big picture too... and volume has a lot to say on this big picture... it even told us that there was an inminent downmove as there was no more important volume on the previous top up moves... I dont know if you looked this video http://www.traderslaboratory.com/forums/f66/warning-signals-volume-1286.html it can be very usefull to know in witch overall context your small intraday trading can be (I trade a 22 tick chart, very small trading) but now I take into acct this daily context information, I can know more the general bias of the market... cheers Walter.

 

I watched the video and here's what I saw (see enclosed pic):

 

1) Decent down move

2) Minimal down move

3) Minimal down move

4) Minimal down move

5) Minimal, if any, down move

6) Minimal, if any, down move

7) The 'big' down move we all saw

 

So, looking at these statistics based on the chart referenced in the video, it appears to me that 5 out 7 times what the 'volume was telling you' was not very good at all. The volume told you to short throughout a strong up-trend.

 

2 out of 7 times you made money, if you were still around for the #7.

 

Am I missing something here? Yes, it's easy to cherry pick the one or two times the volume 'worked', but that is useless if not taken into account with all the times the volume was 'telling' you something.

 

This chart is a perfect example of why I think trying to use daily volume to predict moves is very misleading.

 

Note - before anyone asks - I use a program called SnagIt to annotate my trading charts, like this one. If you are still using paint or not annotating your charts at all, that is a big mistake in my opinion. SnagIt is very user friendly and very inexpensive. It's from the guys that make Camtasia. http://www.techsmith.com/snagit.asp

5aa70dca930f2_ymchartwithdailyvolume.png.e95cbd69fb4ecad846e7e16b86431805.png

Share this post


Link to post
Share on other sites

I think brown you are missing something there... and is the fact that a volume surge can also spot an extreme... once that happens you must re-start the reading of volume from the most inmediat context (volume levels) (actually this thread topic)... now this is not for newbees it takes screentime to read this... I am not that expert must confess... cheers Walter.

Share this post


Link to post
Share on other sites

i would disagree that technicals take less importance at climactic times/emotional etc.

 

imo, TA is, to a large extent, the study of aggregate trader psychology.

 

psychology is always an element of TA, and price is ultimately an opinion reached by two sides of every trade.

 

i think like TA in general (where one looks at various timeframes), volume and volatility needs to be considered in that context.

 

iow, for shorter term trades, the volume needs to be compared on a shorter time frame.

 

and for longer term trades, not so much.

 

this reminds me of the old trader joke, your broker calls and says "the bad news is your account is on margin call and down 50% of its equity. the good news that it was on low volume" :)

 

i don't think anybody should use volume and of itself to predict ANYTHING. that's true of market profile, of indicators in general, etc.

 

it's a matter of synthesizing information.

 

volume does matter (clearly) imo.

Share this post


Link to post
Share on other sites
I think brown you are missing something there... and is the fact that a volume surge can also spot an extreme... once that happens you must re-start the reading of volume from the most inmediat context (volume levels) (actually this thread topic)... now this is not for newbees it takes screentime to read this... I am not that expert must confess... cheers Walter.

 

Walter - I understand the premise behind what the volume is possibly saying and how that can be interpreted, but did my chart example just show that 5 out of 7 times the 'extreme' was simply that the current up-trend took a breather only to resume the trend? I don't see how the chart showed us that the volume surges spotted an extreme. 5 out of 7 times it reinforced the strength of the trend. To me, an 'extreme' would be a major reversal zone and in this chart, the surges in red were anything but a reversal area. Yes, it could have been traded on the short side for a profit if you were able to exit timely.

 

We can both put our 'side' into words, but I think a chart is much more powerful since it is what it is. Taking a look at my annotations, would you agree that 1) there was a red volume surge and 2) if you assume a red surge can lead to a downmove that this did in fact fail 5 out of 7 times?

 

I realize it's easy for me to do this in hindsight, but I'm hoping to provide another side to the argument b/c it can be very dangerous when people in a forum all think the exact same way, esp any newbies reading this. The last thing a newbie should do is read this thread and start trading based on a red/green volume surge. I am attempting to explain here that the surges in our example at best signified a pause from the overall trend.

Share this post


Link to post
Share on other sites

Brown : you cant take into acct the green or red color on the volume histogram, that is just the relationship between open and close of the day (1 bar) , you have to relate pivots of price action going up or down, can you take a look at the bars between 3 and 4 ?.... you will notice price was going up while volume was going down... then inside 4 you will notice a nice drop (large bar) with high volume, we can consider that a volume surge or "selling climax" wich stalls the down move... notice price starts going up and volume on the next days also goes up... thats bullish you will then notice that from PIVOT TO PIVOT volume talks... maybe what you are missing is the reading from pivot to pivot.... (not each bar) hope that helps cheers Walter.

Share this post


Link to post
Share on other sites
browsfan : from an intraday aproach its ok what you say, now its interesting to see sometimes the big picture too... and volume has a lot to say on this big picture... it even told us that there was an inminent downmove as there was no more important volume on the previous top up moves... I dont know if you looked this video http://www.traderslaboratory.com/forums/f66/warning-signals-volume-1286.html it can be very usefull to know in witch overall context your small intraday trading can be (I trade a 22 tick chart, very small trading) but now I take into acct this daily context information, I can know more the general bias of the market... cheers Walter.

 

clicked on the link, can't watch the video!?!

Share this post


Link to post
Share on other sites

*BLING*

 

attachment.php?attachmentid=960&stc=1&d=1173401219

 

Every now and then I go through the member list to see how many posts, activity on board, time spent on board, etc... I boost accounts up that are regular participants on the board. I havent done this last month so will need to spend the weekend going through this.

bling.jpg.aa6b2edba69d2050f57829689bb8e398.jpg

Share this post


Link to post
Share on other sites
Since the the tumble of the indexes we are experiencing higher volatility and higher volume. The question is: Should traders consider the current volume as the norm? For example, today's rally on the YM occurs on a lower volume bar compared to the last 5 trading sessions. HOWEVER, this volume bar is well above average comparing the volume bars for the past few months.

 

How would you view this?

The correlation between Volume and Volatility obviously needs a context within which to test the correlation. The real trick is deciding how much of a timeslice you're going to use to set that context.

 

Soul, you're asking two questions: Is current Volume 'the norm'? Yes, it is for now. Does it have historical similarities? Yes it does. Will it continue uninterrupted and unchanged? Unlikely. So regardless of recent (relative) Volume, the technical basis for assessing Volume's likely interpretation with regard to its recent history and to price movement and Volatility (which I take as Low to High, not Close to Close) remains the same.

 

Your second question regarding how to view the specific instance of YM activity leads to a number of possible answers. The first being a question itself that when you get an uncharacteristicly vibrant price move on relatively low volume what can that indicate? And that this move occured on relatively low volume (within the last 5 days view), but within the context of the last 5 days Volume being much higher volume than previously leads to an obvious conclusion. I'm posting this a few days after the event so I obviously don't need to explain further or imply any foreknowledge of that conclusion.

 

The issue of Volatility and Volume is one I have spent quite some time researching and I did publish intermediate results from this on another site, but in essence, and very specifically in relation to this quoted post, you have to consider what is it that causes the daily range in any instrument to behave the way it does? And what does it 'mean' if this larger/smaller than usual range occurs on higher/lower than normal volume? And how do these clusters of higher/lower Volatility and higher/lower Volume relate to each other?

 

Basically it's a game of Who has been 'convinced' by Whom of What? People take action based on their understanding of what's going on. It's their understanding that's key to subsequent market action and generally quite unrelated to what is really going on.

 

I think I've only scratched the surface and probably not added too much to the initial query, but maybe it's a start.

 

 

 

btw - only just joined today and after a gentle stroll through the site there appears to be some really high quality posts and posters around. Good work.

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Similar Content

    • By FMIND5
      Hello traders,
      I am interested in order flow trading and I will post some trades and predictions, some articles and ideology of a bit different understanding how price moves and why. May be this forum will be the right place. So, for the start I have  couple of charts of recent trade on oil. Also I did some comparison of two different software. Would be great to meet some traders who use order flow too. Lets see. I have a lots ideas and strategies to share. I don't use any traditional indicators, because just numbers are important for me.
       
       
       


    • By trading4life
      Hello, My name is trading4life.
      I just joined this forum.
  • Topics

  • Posts

    • HLF Herbalife stock, watch for a bull flag breakout above 9.02 at https://stockconsultant.com/?HLF
    • Date: 1st April 2025.   Will Gold’s Rally Hold Strong as New Trade Tariffs Take Effect Tomorrow?   Gold continues to increase in value for a sixth consecutive day and is trading more than 17% higher in 2025. Amid fear of higher inflation, a recession and the tariffs war escalating investors continue to invest into Gold pushing demand higher. The trade policy from April 2nd onwards continues to be a key factor for the whole market. Can Gold maintain its upward trend? Trade Policy From Tomorrow Onwards Starting as soon as tomorrow, a 25% tariff will be imposed on all passenger cars imported into the United States. While this White House policy is anticipated to negatively affect European industrial performance, it will also lead to higher transportation and maintenance costs for everyday American taxpayers. The negative impact expected on both the EU and US is one of the reasons investors continue to buy Gold. Additionally, last month, President Donald Trump announced reciprocal sanctions against any trade partners that impose import restrictions on US goods. Furthermore, tariffs on products from Canada and the EU could increase even more if they attempt to coordinate a response. Overall, investors continue to worry that new trade barriers will prompt retaliatory measures, particularly from China, the Eurozone, and Japan. Any retaliation is likely to escalate the trade conflict and prompt another reaction from the US. Experts at Goldman Sachs and other investment banks warn that this will lead to rising inflation and unemployment. They also caution that it could effectively halt economic growth in the US.   XAUUSD 1-Hour Chart   The Weakness In The US Dollar Another factor which is allowing the price of XAUUSD to increase in value is the US Dollar which has been unable to maintain any bullish momentum. Despite last week’s Core PCE Price Index rising to its highest level since February 2024, the US Dollar has been unable to see any significant rise in value. Due to the US Dollar and Gold's inverse correlation, the price of Gold is benefiting from the Dollar weakness. Investors worry that new trade barriers will prompt retaliatory measures from China, the Eurozone, and Japan, potentially escalating the conflict. Experts at The Goldman Sachs Group Inc. believe that such actions by the US administration will drive rising inflation and unemployment while effectively halting economic growth in the country. Can Gold Maintain Momentum? When it comes to technical analysis, the price of Gold is not trading at a price where oscillators are indicating the instrument is overbought. The Relative Strength Index currently trades at 68.88, outside of the overbought area, since Gold’s price fell 0.65% during this morning’s session. However, even with this decline, the price still remains 0.40% higher than the day’s open price. In terms of fundamental analysis, there continues to be plenty of factors indicating the price could continue to rise. However, the price movement of the week will also partially depend on the employment data from the US. The US is due to release the JOLTS Job Vacancies for February this afternoon, the ADP Non-Farm Employment Change tomorrow, and the NFP Change and Unemployment Rate on Friday. If all data reads higher than expectations, investors may look to sell to lock in profits at the high price. Key Takeaway Points: Gold’s Rally Continues – Up 17% in 2025 as investors seek safety from inflation, recession fears, and trade tensions. Trade War Impact – New US tariffs and potential retaliation from China, the EU, and Japan drive uncertainty, boosting Gold demand. Weak US Dollar – The Dollar’s struggle supports Gold’s rise due to their inverse correlation. Gold’s Outlook – Uptrend may continue, but US jobs data could trigger profit-taking. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Date: 31st March 2025.   Trump Confirms Tariffs on All Countries, Sending Stocks Lower.   The NASDAQ continues to trade lower due to the US confirming the latest tariffs will be on all countries. In addition to this, bearish volatility also is largely due to the higher inflation data from Friday. The NASDAQ declines to its lowest price since September 11th 2024. Core PCE Price Index - Inflation Increases Again! The PCE Price Index read 2.5% aligning with expert forecasts not triggering any alarm bells. However, the Core PCE Price Index rose from 0.3% to 0.4% MoM and from 2.7% to 2.8% YoY, signalling growing inflationary pressure. This increases the likelihood that the Federal Reserve will maintain elevated interest rates for an extended period. The NASDAQ fell 2.60% due to the higher inflation reading which is known to pressure the stock market due to pressure on consumer demand and a more hawkish Federal Reserve. Boston Fed President Susan Collins recently commented that tariffs could drive up inflation, though the long-term impact remains uncertain. She told journalists that a short-term spike is the most probable outcome but believes the current pause in monetary policy adjustments is appropriate given the prevailing uncertainties. Although, certain investment banks such as JP Morgan actually believe the Federal Reserve will be forced into cutting rates. This is due to expectations that the economy will struggle under the new trade policy. For example, JP Morgan expects the Federal Reserve to delay rate cuts but will quickly cut towards the end of 2025. Market Risk Appetite Takes a Hit! A big factor for the day is the drop in the risk appetite of investors. This can be seen from the VIX which is up almost 6%, Gold which is trading 1.30% higher and the Japanese Yen which is the day’s best performing currency. Most safe haven assets, bar the US Dollar, increase in value. It is also worth noting that all indices are decreasing in value during this morning's Asian session with the Nikkei225 and NASDAQ witnessing the strongest decline. Previously the stock market rose in value as investors heard rumours that tariffs would only be on certain countries. This bullish swing occurred between March 14th and 25th. Over the weekend, President Donald Trump indicated that the upcoming tariffs would apply to all countries, not just those with the largest trade imbalances with the US. NASDAQ - Technical Analysis In terms of technical analysis, the NASDAQ continues to obtain indications that sellers control the price action. The price opens on a bearish price gap measuring 0.30% and trades below all Moving Averages on all timeframes. The NASDAQ also trades below the VWAP and almost 100% of the most influential components (stocks) are declining in value.     The next significant support level is at $18,313, and the resistance level stands at $20,367.95. Key Takeaway Points: NASDAQ falls to its lowest since September 2024 as the US confirms tariffs on all countries, adding to inflation concerns. Core PCE inflation rises to 0.4% MoM and 2.8% YoY, increasing the likelihood of prolonged high interest rates. Investor risk appetite drops as VIX jumps 6%, gold gains 1.3%, and safe-haven assets outperform. NASDAQ shows strong bearish momentum, trading below key technical levels with support at $18,313 and resistance at $20,367.95. Always trade with strict risk management. Your capital is the single most important aspect of your trading business.   Please note that times displayed based on local time zone and are from time of writing this report.   Click HERE to access the full HFM Economic calendar.   Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding of how markets work. Click HERE to register for FREE!   Click HERE to READ more Market news.   Michalis Efthymiou HFMarkets   Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • PM Philip Morris stock, top of range breakout at https://stockconsultant.com/?PM
    • EXC Exelon stock, nice range breakout at https://stockconsultant.com/?EXC
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.