Volume Questions - from "Master the Markets"

[pavilion103]

I would like to know the difference between a "test" and "stopping volume".

It appears that both dip down and then close towards the high of the bar.
-For a test, low volume means stregnth (no selling pressure)
- For stopping volume, very high volume means strength (buying pressure)

This confuses the heck out of me.

Is the difference that "testing" trades into a period of previous lows (which had previously traded at high volume)?

Can a test occur at any stage of a trend, whereas stopping volume only occurs after a downtrend?

Thanks


p.s. this is of course assuming a long trade (I know they can work both ways)

 

[pavilion103]

I am also confused when a "shake out" occurs.

On page 95 of the book it says:
- This chart shows an example of a ‘shake-out’, which is often seen at the end of a bear move

On page 96 of the book it says:
-This is usually seen after a bull move has been running for some time. You would expect higher prices after this event. A true selling climax looks the same as this shake out does; the big difference is that on a selling climax you will have a Bear Market behind you.

So does the shakeout occur after either a bull OR bear market?

 

[Tanaka]

Almost all terminology can be found at Investopedia:


Shakeout: http://www.investopedia.com/terms/s/shakeout.asp

 

[pavilion103]

Almost all terminology can be found at Investopedia:


Shakeout: http://www.investopedia.com/terms/s/shakeout.asp

Thanks mate. I've been on it a bit before but haven't really utilised it as much as I should have. I guess for some of these I want more detail. Slowly working through it all.

 

[tech/a]

I would like to know the difference between a "test" and "stopping volume".

It appears that both dip down and then close towards the high of the bar.
-For a test, low volume means stregnth (no selling pressure)
- For stopping volume, very high volume means strength (buying pressure)

This confuses the heck out of me.

Is the difference that "testing" trades into a period of previous lows (which had previously traded at high volume)?

Can a test occur at any stage of a trend, whereas stopping volume only occurs after a downtrend?

Thanks


p.s. this is of course assuming a long trade (I know they can work both ways)

As an isolated bar you WILL be confused.
Add the next Bar and its close and the confusion should disappear.
If it closes below the Stopping Volume or Test bar then neither were correct.
One more bar gives "some" confirmation.

I am also confused when a "shake out" occurs.

On page 95 of the book it says:
- This chart shows an example of a ‘shake-out’, which is often seen at the end of a bear move

On page 96 of the book it says:
-This is usually seen after a bull move has been running for some time. You would expect higher prices after this event. A true selling climax looks the same as this shake out does; the big difference is that on a selling climax you will have a Bear Market behind you.

So does the shakeout occur after either a bull OR bear market?

Yes it can and during.

 

[pavilion103]

As an isolated bar you WILL be confused.
Add the next Bar and its close and the confusion should disappear.
If it closes below the Stopping Volume or Test bar then neither were correct.
One more bar gives "some" confirmation.



Yes it can and during.

Bull or Bear market? or both?

 

[tech/a]

Both

 

[pavilion103]

Another volume question. In regards to something I read in a Wyckoff book.

If price breaks out of a range/consolidation on increased volume, generally how much volume is classed as excessive?

In Wyckoff it mentions how a steady increase in volume is best, otherwise it could be cliimactic volume.

Is an increase from say 2M to 7M too extreme on a breakout? Or is it perfectly feasible that this increase could be strong demand (depending on background information)?

 

[joea]

Another volume question. In regards to something I read in a Wyckoff book.

If price breaks out of a range/consolidation on increased volume, generally how much volume is classed as excessive?

In Wyckoff it mentions how a steady increase in volume is best, otherwise it could be cliimactic volume.

Is an increase from say 2M to 7M too extreme on a breakout? Or is it perfectly feasible that this increase could be strong demand (depending on background information)?

Hi.
I have a A4 Trading Checklist. Covers entry, Risk & Trade Management, Exit and finally results. This is the paper work for reference .
On it I have a Volume multiplier in relation Top 20, 21 -50, 51-100, 101 - 200 and 201+. It is in relation to a moving average.
So basically the ratio increases as you head down the list. 1:1 >>> 3:1 >>> 5:1
Maybe you could compile something similar. just a thought.
joea

 

[Billyb]

Another volume question. In regards to something I read in a Wyckoff book.

If price breaks out of a range/consolidation on increased volume, generally how much volume is classed as excessive?

In Wyckoff it mentions how a steady increase in volume is best, otherwise it could be cliimactic volume.

Is an increase from say 2M to 7M too extreme on a breakout? Or is it perfectly feasible that this increase could be strong demand (depending on background information)?

Eyeball it. There's no hard and fast rules. If there is a random breakout bar that has a huge amount of volume compared to the the rest of the bars in your view, and it doesn't close at the high then there could be some supply in that bar. But you need to look at the rest of the price and volume action as well and you may need to wait a few bars for more confirmation.

 

[pavilion103]

Eyeball it. There's no hard and fast rules. If there is a random breakout bar that has a huge amount of volume compared to the the rest of the bars in your view, and it doesn't close at the high then there could be some supply in that bar. But you need to look at the rest of the price and volume action as well and you may need to wait a few bars for more confirmation.

Yeh, no doubt it will take more and more practice to discern these things.

I think sometimes I ask questions knowing that no one can give me an exact answer, but always good to get people's thoughts.

 

[TECM]

Yeh, no doubt it will take more and more practice to discern these things.

I think sometimes I ask questions knowing that no one can give me an exact answer, but always good to get people's thoughts.

My Dad started teaching me about the markets when I was a very young girl. The first thing he told me was to always watch the volume and I think that is incredibly important and a large part of my TA. I think of it like this:

High volume high price = educated sellers selling to uneducated buyers
High volume low price = educated buyers buying from uneducated sellers.

If I am long and see big volume coming in I prepared to exit. If I see a volume spike I exit - they are usually the buyers who think they are going to miss out if they don't get long and they generally do - they get stuck with the stock the big boys offloaded.

I good sign of a low forming is huge volume on the low with an accumulation pattern forming - a slight drop off in volume and then a steady rise. The MIB are taking advantage of those who just can't take any more pain.

I hope that helps a little.

 

[nomore4s]

Yeh, no doubt it will take more and more practice to discern these things.

I think sometimes I ask questions knowing that no one can give me an exact answer, but always good to get people's thoughts.

The best thing to keep in mind when applying VSA or Wyckoff principles is cause and effect.

The cause was high volume and what was the effect? Is there weakness in that bar? Or strength? What do the preceding bars tell you? or do you need to see how the next few bars react to attain more info?

There is a Wyckoff thread which is well worth going through if you haven't already. I personally prefer Wyckoff to VSA even though they are essentially the same thing because I just found that Wyckoff gave me a better overall understanding of what to look for.

 

[pavilion103]

Thanks guys

The last two posts have really hit the mark.

Previously I was trading only breakouts and if volume was high (the higher the better) on an up move I'd enter, without realising that this is where the smart money is selling.

But after reading Wyckoff I am looking for ultra high volume bars as an indication of professional activity. I've found this to be a massive revelation and it has transformed my way of thinking. It is easy to see why 90% of people lose money when they are doing the opposite of professionals.


The other thing I'm really trying to discern is effort v results. This is a little more tricky for me because I am not quite sure how much confirmation is sufficient before entering a trade. I am playing around with some testing on my simulator so am trying to get a feel for it. Sometimes I enter too early and get stopped out. Other times I wait too long and miss a large portion of a good move.

 

[TECM]

Thanks guys

The last two posts have really hit the mark.

Previously I was trading only breakouts and if volume was high (the higher the better) on an up move I'd enter, without realising that this is where the smart money is selling.

But after reading Wyckoff I am looking for ultra high volume bars as an indication of professional activity. I've found this to be a massive revelation and it has transformed my way of thinking. It is easy to see why 90% of people lose money when they are doing the opposite of professionals.


The other thing I'm really trying to discern is effort v results. This is a little more tricky for me because I am not quite sure how much confirmation is sufficient before entering a trade. I am playing around with some testing on my simulator so am trying to get a feel for it. Sometimes I enter too early and get stopped out. Other times I wait too long and miss a large portion of a good move.

Regarding your last two sentences I might be able to help you with that. You can email me at emac.84@bigpond.com

 

[tech/a]

High volume high price = educated sellers selling to uneducated buyers
High volume low price = educated buyers buying from uneducated sellers.

If I am long and see big volume coming in I prepared to exit. If I see a volume spike I exit

Trueisms abound particularly in relation to volume.
While the above statement and strategy are valid they can be very wrong as well as very right.Myself and the rocket scientist are involved in testing as many trueisms as we can find results are less than encouraging with many not showing a statistical edge.

Simple questions like How much volume is High and How High is high in a price become a little more complex.

Which leads into No More 4's

The best thing to keep in mind when applying VSA or Wyckoff principles is cause and effect.

VSA and Wycoff would have you believe that simple observation as stated above would give you a clear cut and statistical edge.Truth is recognising the "Cause and or effect" of volume isnt clear cut.

If we look at the chart below TECM who is quite right in observation---would have lost a motzza of "potential profit" yet No More 4s
if he read it as positve cause---would have done very well.

 

[pavilion103]

I know there are no hard and fast rules that work 100% of the time. In that last example Tech, I would have thought the first big volume spike would have been a warning sign that supply is coming onto the market. Looks like I would have got it wrong.

 

[TECM]

Trueisms abound particularly in relation to volume.
While the above statement and strategy are valid they can be very wrong as well as very right.Myself and the rocket scientist are involved in testing as many trueisms as we can find results are less than encouraging with many not showing a statistical edge.

Simple questions like How much volume is High and How High is high in a price become a little more complex.

Which leads into No More 4's



VSA and Wycoff would have you believe that simple observation as stated above would give you a clear cut and statistical edge.Truth is recognising the "Cause and or effect" of volume isnt clear cut.

If we look at the chart below TECM who is quite right in observation---would have lost a motzza of "potential profit" yet No More 4s
if he read it as positve cause---would have done very well.

View attachment 44867

I don't know what stock or index that is Tech/a and I can't see whether it came off an old high so it makes it a tad difficult for me to read properly. However if it did come off a high there was a good lot of accumulation happening there and then tht big vol spike would have been a signal for me to watch. It came off again and more volume came in and there was another smaller spike to flush out the last who could take no more pain then off it went making higher highs and higher lows - good trade.

 

[motorway]

I know there are no hard and fast rules that work 100% of the time. In that last example Tech, I would have thought the first big volume spike would have been a warning sign that supply is coming onto the market. Looks like I would have got it wrong.

And you could have been right. Test Response .. note how Wyckoff is looking at what sellers and buyers achieve in their struggles ... Not getting totally blinded by the Volume.

The volume is saying LOOK HERE.. But in the context where from

How does what occurred before help define that Bar ?
What was the stock doing as regards Volume and price activity ?
Time ? Duration ! How much happened so soon compared to before ..

Test response
The next bars are so important
what happens ( the response )..
Half way points
how much ground is given back ?
Time .. How long do the sellers control and what do they achieve
compared to that move up

Do not get focused on JUST VOLUME

Price range , lifting power , Duration & (then )VOLUME--> price range , lifting power etc ... This is a circle the importance flows <====> both directions

test response
and the context ( what Wyckoff calls the Position )

You maybe right or wrong
But what ever you are the "SUBSEQUENT RESPONSE" will dynamically and continually reveal more ( RDW analogies of a moving/motion picture like a film that unfolds )

The other bar at the RHS
look left and look where from

Absorption or Distribution
A danger point ( risk )
very important here to look at the other aspects not blinded by the volume
esp ground gained or lost in terms of volume and again time ( duration )

You are not right or wrong in an absolute sense
It is Just how long you take to adjust
How long it takes you to IDENTIFY ( not predict )

Motorway

 

[pavilion103]

Brilliant post Motorway. Thank you. I will take my time working through that.

I find that I read a Wyckoff book, then my eyes are opened and I oversee so much that I have been missing. I go back and apply it and I slowly forget things and then can become fixated on just looking for high/low volume. Then I go back and read it and my perspective is opened up again.
So much to consider, not just volume!