Recognising Volume - opportunity or trap?

[nizar]

there are many different ways of making a profit in the share market and each to their own. If price and volume are all some people need good on them.

It also depends a lot on timeframes i guess.

Point being: there is no 'right' way

Not even.
Some systems do well trading SOLELY on price.

 

[motorway]

Not even.
Some systems do well trading SOLELY on price.

It depends on how well you want to do

most pure priced based systems
are variations of breakouts

Volume systems identify turning points
that will lead to price breakouts

This can mean huge difference in Risk /Reward

The mythical one tick stops

Absolutely.
You must know where you are in a trade before you take it.

very good advice

trend is one thing
the position in the trend is another

motorway

 

[professor_frink]

Not even.
Some systems do well trading SOLELY on price.

and some don't even use that.

"Price. We don't need no stinking price!"

 

[tech/a]

Volume systems identify turning points
that will lead to price breakouts

This can mean huge difference in Risk /Reward

This is where this sort of analysis stands alone.
When you trade R/R rather than for a profit---profit comes.
But return on the money you use to invest/trade with grows enormously.

Nizar
I know the following will make perfect sense to you.
As you know I trade systems.
My main system returns a healthy 12:1 R/R BUT my average hold time is over 1 yr.It performs brilliantly in Bullish markets and poorly in choppy to bearish markets.

My short term Trading returns 3-7:1 R/R in an average of 5 days.
and performs consistently over all market conditions.
Its just the setups that alter with conditions.
Now I'm looking for long setups.
With the first collapse of the Dow I was looking for short setups.

The 2 styles are vastly different and has taken me a great deal of time to get my head around each as an individual trading methodology.

 

[nizar]

Tech/a and motorway,

Yes i agree with both of you.
Firstly, that using VSA can improve your results.

And secondly that short timeframes can be very profitable because of precisely what you said, decreased trade length and therefore increased opportunity.

In fact, short term trading will also provide a much smoother equity curve and gives you less market exposure.

All very favourable.

I will be working on both of the above over the next few months.

Thanks for your thoughts gents.

 

[sleepy]

Hi John,

re: Long Term trading
Are you still sitting on the sidelines or have you re-entered the market?

re: Short Term Trading
Did you do any backtesting with tradesim or your strategy still evolving?
Are you using any leverage?
Do you think youd get the same R/R if:
a) you werent using Eliot Wave to identify trends?
b) were using Tradeguider EOD rather than real-time?

sleepy

 

[ithatheekret]

Astute analaysis here .

Lets assume that Mr Smart Money wants to profit from an anticipated move.

What will reveal his intention ?



Why can their future intentions not be concealed ?

because they have to BUY or SELL first...

They can not BUY or SELL after..

This naturally means VOLUME

And

So Volume given context by the subsequent action ( Price movement that results ) in the context of the action prior...

Is impossible to manipulate...

Everything else can be a tool of manipulation

mkts are a double auction process...
allows for all sorts of games..
except with volume ( on balance )

what time frame does Mr Smart Money operate on ?

All time frames ... The Volume bars are His footprints...

Volume is very important
But it is not everything..
The volume that matters is not necessarily the volume that accompanies the price action.
But is the volume that leads the price action
The volume that stops is often ( but not always ) the volume that starts...

Fib levels have No significance other than as useful measures of relative strength and weakness... The main reference point is 50%..

motorway

 

[Timmy]

When you trade R/R rather than for a profit---profit comes.

Fantastic words.
While getting the analysis right is important, its only going to get me about 25% of the way to profitable trading, the more important stuff is the other things I do to manage the R/R, especially on an ongoing basis once the trade is open.

 

[tech/a]

Sorry for the delay just saw the post!

Hi John,

re: Long Term trading
Are you still sitting on the sidelines or have you re-entered the market?

No still concentrating on the short term. I'm actually committing some (From longer term liquidation) to our new Ponderosa. I'm actually working on short term ideas and trading a few right now.This is more a personal choice than one based upon market analysis.

re: Short Term Trading
Did you do any back testing with tradesim or your strategy still evolving?

No Not yet.I'm trading one idea which is a hybrid of Nicks ideas .
I have 3 others I'm refining so to speak.All show much promise.I'm actually lured by the opportunity to make 3-7 R/R in a few days often less than a few weeks!

Are you using any leverage?

No but am investigating ANZ margin who have 106 stocks that you can short and their list consists of 1100 stocks and trusts you can trade long.I have opened an account but trade about 1/5th of the funds on the smalls at the moment.Not on margin as I never trade beyond the initial capital--YET.

Do you think you'd get the same R/R if:
a) you weren't using Eliot Wave to identify trends?

Yes Id just use another filter.Some of the ideas I'm working with don't have any Elliott at all!

b) were using Trade guider EOD rather than real-time?

Yes but the time frame in which you did it would probably be a little longer.

 

[nomore4s]

No but am investigating ANZ margin who have 106 stocks that you can short and their list consists of 1100 stocks and trusts you can trade long.I have opened an account but trade about 1/5th of the funds on the smalls at the moment.Not on margin as I never trade beyond the initial capital--YET.

Tech, you might want to look at the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs) or no margin at all, but you can go short on most stocks. But it is $20 each way in fees.

 

[tech/a]

Your right I might be very interested.

Thanks for the heads up!

 

[sleepy]

" ... the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs)"

From the sounds of that they may be better for those using CFDs longer term (ie weeks/months) cf to regular CFD providers ... or am I missing something?

sleepy

 

[doctorj]

Has anyone had any luck coding (or finding) some sort of VSA framework into Ami?

 

[nomore4s]

" ... the Macquaire Prime platform, can use CFD type margin (without the interest charges that go with CFDs)"

From the sounds of that they may be better for those using CFDs longer term (ie weeks/months) cf to regular CFD providers ... or am I missing something?

sleepy

Yeah it is better for longer & shorter term trading imo, alot cheaper re interest. Also you get all the benefits of share ownership - D/E & franking credits, share placements etc. And you can short most stocks as well.
Have been using them for a few months and am pretty happy so far.

Only disadvantage in regards to some CFD providers is it is only for Aussie shares.

Link here

 

[sleepy]

Thanks nomores4,
Whats the trading platform like?
Also just found these for those interested ...

http://compareshares.com.au/derk12.php
https://www.aussiestockforums.com/forums/showthread.php?t=6934&highlight=macquarie+prime

Back on topic ...
"No Not yet.I'm trading one idea which is a hybrid of Nicks ideas"
John,
... is it based on breakouts from a base ....or around chart patterns with low risk setup in order max. R/R?

sleepy

 

[tech/a]

or around chart patterns with low risk setup in order max. R/R?

Setup is Elliot Based.
Buy signal is both Elliot and VSA based.
Sell is Elliot Target and VSA execution.
Stop is extremely tight and as such R/R is very high over short periods.

 

[nomore4s]

Thanks nomores4,
Whats the trading platform like?

Yeah quite good, but the only other platform I've used is Commsec, and it beats that hands down.

Sorry for taking the thread off topic a bit tech.

 

[nizar]

Stop is extremely tight and as such R/R is very high over short periods.

Surely at the expense of win % ?

 

[motorway]

Surely at the expense of win % ?

I would not think so....
Buying at only the right time should increase win % ?

Stop is extremely tight and as such R/R is very high over short periods.

bear in mind that all breakouts start at the bottoms
And that all moves of 100% + start intra day on a particular tic


It is not about time frames .
It is about moves.

About moves that have enough preparation...
About moves that are going to move now..

The size of the move that is sufficient for your purposes.
determines what is noise and what is signal..

motorway

 

[tech/a]

Nizar.

NO!!
With the combination of the entry technique I use the win rate is very high.
Remember I only need small moves.
If I have a risk of a few cents,my R/R can be generous very quickly.
I'm currently trading YML.
The day before yesterday I had a signl to buy at $1.07 with a stop at $1.02
Now at $1.22 so 15c or 3:1 R/R 2 days later.

The other benifit is that I can and do exit trades with no demand after entry,if this is clear then I wont stay around rather place it on a watchlist,exit and wait if the enrty is still valid.
This has often seen me out at .5-1:1 R/R and better opportunity cost.

Its just a completely different way of trading to systems trading.